Hello, this is Claire Ellerhorst, Senior Portfolio Manager at Fifth Third Bank with this week’s Economic Beat.
Major U.S. equity indices dropped yet again last week, with the S&P 500 Index clocking its seventh weekly decline in a row. The benchmark index fell 3.0% in total return and is now down 17.7% year-to-date. The Nasdaq Composite dropped 3.8% and the Dow Jones Industrial Average fell 2.8%. Yields fell, with the 10-year U.S. Treasury yield down 14 basis points for the week to end at 2.78% but remains 127 basis points higher than its 2021 year-end level of 1.51%. The U.S. dollar dropped sharply against major peers, after gaining in the preceding four weeks. Oil prices came down modestly for the week.
Investors continue to focus on the U.S. Federal Reserve’s plans for aggressive monetary tightening in an effort to dampen inflationary pressures. Fed watchers and market participants are trying to assess whether the Fed will be able to engineer a so-called "soft landing" by helping slow inflation without cutting off economic growth.
On the economic calendar, the U.S. Commerce Department reported that retail sales were up 0.9% in April in a broad-based gain. The solid pace suggests a strong U.S. consumer, despite surging inflation. Excluding auto and gas sales, receipts were up 1.0% in the period. Industrial production surprised to the upside, rising 1.1% in April. Housing starts fell 0.2%, on expectations for a steeper decline, but following a downwardly revised 2.8% decline in March. In other housing data, existing home sales dropped 2.4% last month, falling to the lowest since June 2020 amid sparce inventory, rising prices and rising mortgage rates.
Retailers were in focus on the earnings calendar last week and several major retailers posted disappointing results. Inventory issues, higher supply chain costs and higher wages were some of the key overhangs.
In the week ahead, the economic calendar includes more housing data, durable goods orders and a second estimate of first quarter gross domestic product. We’ll also get quarterly and monthly readings on personal consumption expenditures, a key inflation measure tracked by the Federal Reserve. Minutes from the Fed’s May meeting will be released, which may shed light on the central bank’s path for policy ahead.
As always, we’ll be watching and reporting back to you. Thank you.
