Stocks opened higher Tuesday after the long weekend and then fought to hang on to those gains today as Fed Chairman Powell testified before congress. It seemed the Fed Chair was more willing to acknowledge a recession was at least possible which gave rise to hopes that further rate rises may indeed be data-dependent. Last week's move lower came as recession fears deepened following a Fed hike in interest rates and weak economic data.
The Dow Jones Industrial Average fell 4.79%, while the Standard & Poor’s 500 dropped 5.79%. The Nasdaq Composite index slid 4.78% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 4.51%.1,2,3
Stocks were under pressure all week due to inflation worries, higher yields, and rising recession concerns. In advance of the much-awaited mid-week meeting of the Federal Open Market Committee (FOMC), bond yields jumped, and stocks retreated on speculation that the Fed might raise rates by 75 basis points. When the Fed announced a 75 basis point hike on Wednesday, stocks rebounded strongly.
The enthusiasm was short-lived. Stocks resumed their slide on Thursday as global central banks followed with their own rate hikes. Recession fears grew based on a weak housing starts report and a contraction in the Philadelphia Fed Business Index–the first contraction since May 2020.4
Fed Rate Hike
The Federal Reserve announced a 0.75% hike in the federal funds rate, making it the biggest rate increase since 1994 and signaling its commitment to address inflation. The report from last week’s FOMC meeting also indicated new rate projections, showing that all members expect rates to rise to at least 3.0% by year-end, with half the members expecting rates to rise to 3.375%.5
The 75 basis point rate increase was a late-developing change from earlier Fed guidance of a 50 basis point increase. The change of heart was in response to recent inflation data and rising inflationary expectations.6
This Week: Key Economic Data
Tuesday: Existing Home Sales.
Thursday: Jobless Claims. Purchasing Managers’ Index (PMI).
Friday: New Home Sales. Consumer Sentiment.
Source: Econoday, June 17, 2022
This Week: Companies Reporting Earnings
Tuesday: Lennar Corporation (LEN).
Wednesday: KB Home (KBH).
Thursday: FedEx Corporation (FDX), Darden Restaurants, Inc. (DRI).
Source: Zacks, June 17, 2022
"In memory everything seems to happen to music."
– Tennessee Williams
Things You Can Do on the IRS Website
While the IRS website might not be in your top bookmarks, the website is helpful for a lot of things regarding taxes. Here are just a few things you can do on the site:
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
Improve Your Swimming with Masters Swim
Swimming is a fantastic full-body, low-impact workout for people of all ages. Check out US Masters Swimming for a club near you as the weather warms up! USMS is an organized swimming club for swimmers of all levels. Swimming with a Masters club is a great way to build camaraderie, meet new friends, get better at swimming, and enjoy a great workout. There are clubs all over the country, likely at a pool near you, which you can find through the Club Finder tool on the USMS website. The coaches will help you start (and stick with) a swimming routine, improve your stroke, and learn more about the sport.
Tip adapted from US Masters Swimming8
It has 18 legs, is uniformed, walks and runs on grass and artificial turf, and catches flies. What is it?
Last week’s riddle: What surrounds everyone and is the end of time and space? Riddle answer: The letter "e."
Stepped waterfall group Blue Moon Valley, Lijiang, China
Footnotes and Sources
2. The Wall Street Journal, June 17, 2022
3. The Wall Street Journal, June 17, 2022
4. CNBC, June 16, 2022
5. The Wall Street Journal, June 15, 2022
6. The Wall Street Journal, June 15, 2022
7. IRS.gov, March 20, 2020
8. usms.org, February 22, 2022
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Weekly Market Insights: Fed Rate Hike Triggers Market Dip
June 21, 2022