Hello, this is Josh Waynick, Investment Strategist at Fifth Third Bank
Major US equity indices disappointed investors with negative returns over the last week. Specifically, the S&P 500 moved lower by 2.9%. The Nasdaq Composite was down 3.6% and the Dow Jones Industrial Average fell 1.9% for the week. Looking at the U.S. Treasury yield curve, over the last week yields rose across all term points with longer maturities seeing a larger increase in yields than shorter maturities, unwinding some of the current US Treasury yield curve inversion. The U.S. 10-year Treasury Note yield rose to 4.43% with the U.S. 2-year Treasury Note rising to 5.11%. As a result, the 2-year/10-year U.S. Treasury Curve remained inverted and ended the week at 68 basis points inverted. Similar to yields, the US Dollar index, measuring the relative strength of the US Dollar against a basket of global currencies, ended the week higher by 0.3%. Gold moved slightly higher last week by 0.1%, ending the week at $1,925 per ounce. Additionally, West Texas Intermediate crude oil had a relatively active trading week and ended the week down .8% to $90.03 per barrel, bucking a trend of 3 weeks of higher prices.
The major news from last week that drove most headlines came from the U.S. Central Bank, and the most recent FOMC meeting. On Wednesday, U.S. Federal Reserve voted to pause their interest rate increases leaving the Fed Funds target range at 5.25% to 5.50%. The pause news was paired with updated economic projections and commentary that suggested the Central Bank will likely hold interest rates higher for longer. Specifically, the Fed's published statement noted that "… economic activity has been expanding at a solid pace…" The statement continued by saying that job gains "… remain strong, and the unemployment rate has remained low." The statement concluded by reiterating their guidance on what they monitor for future decisions. Specifically, future actions will "… take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
With a refreshed view from the Fed of a resilient and expanding economy, the "Higher for longer" narrative of market participants grew which was paired with a pullback in equity prices across major US Indexes.
From an economic lens, the week ahead is expected to be rather quiet. Investors will digest the latest data points on durable goods orders on the 27th, consumer saving and spending updates on the 29th, and the University of Michigan Sentiment index on the 29th as well.
The most recent earnings season has started; but only 8 companies in the S&P 500 reported so far. In the week ahead, 8 more companies in the S&P 500 will provide updates to their financial results. Specifically, Accenture, CarMax, Carnival, Cintas, Costco, Micron, Nike, and Paychex will provide updates.
That concludes this week's Economic Beat. As always, we will be watching and reporting back to you next week.