Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices declined last week, snapping a five-week streak of gains for the S&P 500 Index and an eight-week win streak for the Nasdaq. The Nasdaq Composite and S&P 500 Index each fell about 1.4% in total return, while the Dow Jones Industrial Average fell 1.7% in the holiday-shortened week. The weakness was broad-based with more than 400 S&P 500 stocks ending the week in the red.
Markets took on a risk-off tone amid concerns about overbought conditions and dampening sentiment. Continued inflation pressures and the potential for an extended global tightening cycle were factors weighing on stocks. Fedspeak has been mixed, with Atlanta Fed President Bostic saying he favors no more rate hikes this year, while San Francisco Fed President Daly said two more increases this year would be a reasonable projection. Fed Chair Jerome Powell told Congress that the central bank would move interest rates at a "careful pace" and policymakers are at least close to done with the tightening cycle.
The U.S. economic calendar was relatively light, but a few releases were closely watched. Housing starts jumped 21.7% in May, the largest percentage gain since October 2016 and well above economists’ estimates for a modest increase. Construction on single family homes surged by the most in more than three decades and building permits for future construction also rose.
Crisis erupted in Russia Friday, with Moscow facing a threat of an armed insurrection by private military group fighters. By Saturday, a deal was reportedly reached to pull back the troops from their march toward the capital. U.S. Secretary of State Antony Blinken said over the weekend that while we have limited information on the internal conflict, there may be a continued threat to Russian President Vladimir Putin’s authority.
In the week ahead, economic releases include durable goods orders, housing data, consumer confidence and the final reading on first quarter U.S. economic growth. We’ll also get key inflation data on Friday from the report on personal consumption expenditures for May. The core reading is the Fed’s preferred measure of inflation, a key data point in determining the need for additional rate hikes.
As always, we’ll be watching and reporting back to you. Thank you.
