Wall Street Ends Best Week Since March
Despite small gains and losses on Friday, Wall Street had its most successful week since March. The S&P 500 gained 2.6%, the Dow Jones rose by 1.2%, and the Nasdaq increased by 3.2% since Monday.
However, on Friday, the S&P 500 fell by 0.4% after fluctuating throughout the day. Nevertheless, it is still on track for its fifth consecutive week of earnings, which would be its longest streak since November 2021. Additionally, it is near its highest level since April 2022.
The Dow Jones Industrial Average fell by 0.3%, while the Nasdaq composite index experienced a 0.7% decline.
The yields of the Treasury bond increased, with the 10-year Treasury note rising to 3.77% from 3.72% on Thursday afternoon. The two-year Treasury note, which is most affected by expectations about the Federal Reserve, rose to 4.70% from 4.65%.
Fed Holds Interest Rates Steady, But Raises Possibility of Future Increases
The Federal Reserve decided to maintain its benchmark interest rate at its recent meeting. However, it warned that there could be two more rate hikes this year. The next meeting is scheduled for July 25-26, and there is speculation that rates will be raised. Traders, according to CME Group data, believe it will be the final increase of the year.
Prior to this break, the Fed had raised interest rates at 10 consecutive meetings since March 2022. Its objective has been to control inflation without causing a recession.
“The idea that the Fed is pausing and taking time to assess the cumulative effect of its policies on the economy is the right approach,” said Charlie Ripley, principal investment strategist at Allianz Investment Management.
The S&P 500 has seen a 15% increase this year, driven by hopes that the Federal Reserve will soon end its interest rate hikes as inflation cools and the economy avoids a damaging recession. The majority of Wall Street’s gains have come from big tech stocks, which would benefit the most from lower rates.
The latest Fed meeting followed a report on Tuesday showing a continued cooling of inflation in May.
A widely followed poll on Friday indicated that American consumers are also lowering their expectations of future inflation. This is significant for the Federal Reserve, as it aims to prevent high inflation expectations from triggering a vicious cycle that worsens inflation. The preliminary reading of the University of Michigan survey also suggested that consumer sentiment is strengthening more than anticipated.
Overall, investors encountered a mixed set of economic updates this week. While retail sales in the United States unexpectedly strengthened in May, the labor market showed signs of weakening as more workers applied for unemployment benefits than expected. Additionally, the manufacturing industry continued to contract due to the impact of higher interest rates.
Wall Street has been closely monitoring the latest company statements to gain insight into the direction of the economy. Analysts have warned of a possible recession this year, but so far, the economy has remained strong. However, several industries have cautioned about a decline in demand that could persist throughout the year.
Markets in Europe and Asia experienced gains.
Upcoming Calm Week for Investors
Investors can expect a considerably calmer week ahead, with only a few economic updates on the housing market. Financial markets in the United States will be closed on Monday in observance of Juneteenth.
(With information from AP)