After the S&P 500 broke a seven-week losing streak with an eye-popping 6.6% gain in the prior week, the major stock market averages were unable to keep the positive momentum going and finished in negative territory last week. The Dow Jones Industrial Average lost .9 percent to 32,899.70 – the NASDAQ Composite dropped 1% to 12,012.73 – and the Standard & Poor’s 500 Index fell 1.2% to 4,108.54. These losses came despite a better-than-expected May Jobs Report.
The U.S. Department of Labor reported the economy added 390,000 jobs last month, versus expectations for gains of around 325,000. The unemployment rate held steady at 3.6% and average hourly earnings rose 5.2% from a year ago. The strong report dashed hopes (justified or not) that the Fed may ease up on rate hikes after the summer. The data reinforced expectations for a long series of rate hikes, and investors are concerned higher interest rates might slow the economy too much and push us into recession. Also weighing on market sentiment last week were comments from a couple high profile corporate leaders.
JPMorgan Chase CEO Jamie Dimon commented he sees an economic “hurricane”, while Tesla CEO Elon Musk reportedly stated he had a “super bad feeling” about the economy and was going to cut jobs. Bottom line – the market is facing several headwinds right now, including inflation, rising interest rates, supply chain issues, and the war in Ukraine – culminating in negative psychology and momentum. Whether or not this negative psychology changes in the week ahead may depend on Friday’s CPI (Consumer Price Index) report for May. Expectations are for prices to have increased 8.2% on a year over year basis. If and how quickly inflation cools will be a key factor in when the Federal can stop its interest rate hikes – so any easing of inflation would be welcome news to both Wall Street and Main Street.
As always, don’t hesitate to contact us with any questions you may have or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC