In this week’s recap: Inflation takes center stage.
THE WEEK ON WALL STREET
In a volatile trading week, stocks extended their losses as economic growth and inflation concerns soured investor sentiment.
The Dow Jones Industrial Average dropped 2.14%, while the Standard & Poor’s 500 lost 2.41%. The Nasdaq Composite index fell 2.80% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 3.21%.1,2,3

A TURBULENT WEEK
Inflation moved to center stage last week with the release of April’s Consumer Price Index (CPI) and the Producer Price Index. Both numbers came near their 40-year highs but were lower than March’s year-over-year numbers. The results heightened investor anxiety about future Fed monetary tightening and its impact on economic growth.
In recent weeks, technology stocks have borne the brunt of the downdraft as investors lightened up on risk exposures, with some of the mega-cap tech names getting swept up in the selling pressure. Cooling import price increases buoyed spirits on Friday, helping spark a rally that reduced the week’s losses.

INFLATION STAYS HOT              
Investors were greeted with a mixed CPI report, looking for signs that inflation may be cooling. Year-over-year costs rose 8.3%, slower than the previous month but faster than consensus estimates. Excluding food and energy, core inflation climbed 6.2%. Buried beneath the headline number was a 5.1% yearly increase in shelter costs, the most significant increase since 1991. Shelter costs account for one-third of the CPI.4
Inflation has been a weight on markets all year. Investors are concerned that the persistence of higher prices may tip the economy into recession as increased spending on essential needs crimps consumers’ spending power.
Consumer Price Index (CPI)- The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of US inflation. The US Department of Labor publishes the CPI every month.


Hello,

Few investors should have been surprised when the Federal Reserve raised interest rates after its May meeting.
 
Throughout April, Fed Chair Jerome Powell and several Fed Governors talked about the need to keep raising short-term rates to help manage hot inflation. They suggested that a series of rate hikes throughout the summer may be necessary to cool prices.
 
What should have surprised investors was the reaction by the financial markets.
 
As the May meeting came to a close, markets cheered as traders expressed confidence the Fed would be able to guide the economy to a “soft landing” and avoid a recession. But in the days that followed, stock and bond market volatility picked up as the reality of higher interest rates started to settle in.
 
What’s next? Fed Governors have prepared us for higher short-term rates in the coming months. But some economists point out that the bond market has already done some of the work for the Fed, meaning traders have already pushed longer-term interest rates higher. For example, the yield on the 10-year Treasury has doubled this year.
 
We’re in a transition period with the economy. High inflation is forcing the Fed into a cycle of raising interest rates. It’s best to prepare for more volatility as the markets adjust to what’s ahead. Please reach out if you want some additional insight. I’ll be happy to share more information. To reach me, call 800-871-1219 or email [email protected]. Hit the Meet with Faye button if you want to schedule an appointment.

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Thanks,
Faye Sykes
CEO, Independent Wealth Manager, CLTC & NSSA
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THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Retail Sales. Industrial Production.

Wednesday: Housing Starts.

Thursday: Existing Home Sales. Jobless Claims. Index of Leading Economic Indicators.
Source: Econoday, May 13, 2022
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
 
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Walmart, Inc. (WMT), The Home Depot, Inc. (HD).

Wednesday: Cisco Systems, Inc. (CSCO), Target Corporation (TGT), Lowe’s Companies, Inc. (LOW), The TJX Companies, Inc. (TJX), Analog Devices, Inc. (ADI).

Thursday: Applied Materials, Inc. (AMAT), Palo Alto Networks, Inc. (PANW), Ross Stores, Inc. (ROST).

Friday: Deere & Company (DE).
Source: Zacks, May 13, 2022
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
If you’re thinking about selling a business, consider contacting a business broker, one that represents companies like yours. It may make finding an appropriate buyer easier.
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Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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CITATIONS:
1. The Wall Street Journal, May 13, 2022
2. The Wall Street Journal, May 13, 2022
3. The Wall Street Journal, May 13, 2022
4. CNBC, May 11, 2022


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