Rebound Week- Monday Morning Market Memo – March 21, 2022

Rebound Week- Monday Morning Market Memo – March 21, 2022

After the Dow Jones Industrial Average and Standard & Poor’s 500 Index previously entered correction territory (down over 10%), and the NASDAQ Composite hit bear market territory (down over 20%) – the three major stock market indices rebounded, or should we say, surged, last week – posting their best weekly gains since November 2020.  The Dow and S&P gained 5.5% and 6.2% respectively, while the NASDAQ jumped 8.2%.

Investors looked past the still existing problems of inflation, the Russian invasion of Ukraine, and rising interest rates.  With cash on the sidelines after recent selling, investors were in the “buy-the-dip” mentality.  FOMO was likely involved as well – Fear of Missing Out on the next market rally.  Underlying positive factors still at play in the market include a strong employment picture and earnings which are still expected to hold up/grow going forward.  Overall, the stock market was simply in a better mood last week, justified or not.

Looking at interest rate news specifically, the Federal Reserve, as widely expected, raised interest rates by ¼ point last week (its first hike since 2018).  Further, expectations are the Fed will raise rates at its remaining six meetings this year.  A couple of Fed members are vocalizing some of the upcoming rate hikes may need to be ½ percentage point increases.  No doubt about it – the Fed is tracking a new (hawkish) course on monetary policy – and is in the fight-inflation mode.

While the week ahead is light on economic data, we’ll get an interesting and diverse batch of earnings reports to mull over.  Companies scheduled to report include NikeAdobeGeneral MillsKB HomeWinnebagoFactSet Research Systems, and Darden Restaurants.  As we mentioned previously, we continue to expect volatile swings in the market, as both Wall Street and Main Street are in volatile times.

All the best – Southport Station Financial Management, LLC