Market Rebound – Monday Morning Market Memo – June 27, 2022

The Dow rallied over 800 points (2.7%) Friday, capping off a major comeback week for the stock market.  All three major averages snapped 3-week losing streaks in notable fashion – the Dow Jones Industrial Average gained 5.4%, the Standard & Poor’s 500 Index jumped 6.5%, and the NASDAQ Composite surged 7.5%.

Factors behind the weekly gains included bargain hunters stepping in after the market recently hit bear market territory (a drop of 20%), along with some hope inflation might be starting to cool off.  Commodity prices have been falling of late, and signs of slower growth are leading many investors to believe the Federal Reserve may be able to ease up in raising rates to fight inflation.  The market now expects the Fed Funds rate to peak at 3.25% to 3.5% in December – a notch lower than a week ago – according to the CME Fedwatch Tool.  Further, current expectations are the Fed will start cutting rates in about a year from now.

Also in the mix last week was an earnings report from FedEx, which is widely considered to be an economic bellwether.  The company reported better-than-expected quarterly profits and issued positive sales and earnings guidance for the year.  Looking to the week ahead……

….. the market will likely remain in a tug of war between inflation risk and how far the Fed will go in tightening monetary policy.  Also, we’ll get a look at a handful of earnings reports – from companies including NikeGeneral MillsPaychexMicron Technology, and Walgreens Boots Alliance – before earnings season kicks off in a couple weeks.  For the second quarter of 2022, the estimated earnings growth rate for the S&P 500 is 4.3% – according to data from FactSet.  Whether or not corporate earnings hold up will be a key driver for the upcoming direction of the market.

The markets are closed Monday July 4th in observance of Independence Day – we hope you enjoy the long holiday weekend – without too many bear sightings!

All the best – Southport Station Financial Management, LLC