Last Week’s Summary
- S&P 500 Index rose 2.62%
- International Equities rose 2.81%
- Emerging Markets rose 2.93%
- U.S. 10-Year Treasury Yield rose to 3.76%
- Initial Jobless Claims rose to 262k
- Fed Funds Rate left unchanged
- CPI fell to 4.0%; Core fell to 5.3%
What to Watch for This Week
- T, 6/20/23 Housing Starts
- W, 6/21/23 MBA Mortgage Applications
- Th, 6/22/23 Initial Jobless Claims, Leading Index, Existing Home Sales
- F, 6/23/23 S&P Global U.S. Manufacturing PMI
Weekly Market Recap
Despite experiencing a downtick on Friday, the U.S. equity markets achieved their fifth consecutive week of gains, a stretch not seen since November 2021. This positive momentum coincided with the S&P 500 entering a technical bull market, surging over 20% from its recent low point. The rally in the market has been largely fueled by enthusiasm surrounding artificial intelligence within the technology sector.
However, this surge is causing some traders to question whether the market is approaching, or may have already reached, an overbought stage. In a significant departure from its previous actions, the Federal Reserve decided to keep interest rates unchanged, marking the first pause in its aggressive rate hiking cycle. This decision is being seen by many as a “hawkish-pause,” with expectations that there will still be at least one more interest rate hike before the year concludes.
Fed Chair Powell’s comments reinforced this sentiment, as he stated “nearly all Fed officials expect it will be appropriate to raise interest rates ‘somewhat further’ in 2023 to bring down inflation. Not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate”.
The sentiment for another rate hike is supported by the stagnant initial jobless claims for the week, which aligns with Powell’s observations of persistent inflation and strength in the labor market. Notably, the Federal Reserve’s decision to pause stands in contrast to the actions of most major central banks, which have continued raising interest rates during this period. Initially, the U.S. 10-Year Treasury Yield decreased in response to the decision to leave rates unchanged, but it rebounded on Friday, closing the week just above 3.76%.