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With the absence of any major news, the stock market was a little less volatile this past week. The markets closed down for the week amid continuing worries about inflation and how aggressive the Federal Reserve will be.

Even with a positive jobs report on Friday, the stock market dropped. The Dow Jones Industrial Average lost 1.1 percent, the S&P 500 fell 1.6 percent, and the NASDAQ lost another 2.5 percent Friday.

For the week, the Dow lost 0.9 percent, the S&P 500 fell 1.2 percent, and the NASDAQ dropped 1.0 percent. These indexes continue to be down for the year, with the DJIA down 9.5 percent, the S&P 500 down 13.8 percent, and the NASDAQ down 23.2 percent.

In other markets, West Texas Intermediary crude oil climbed higher last week to close at $120.26. The spot price for gold was down $17.70 to close at $1,853.70 per ounce. Bonds closed at $102.77, down another 1.3 percent for the week and now down 9 percent for the year.

The May jobs report came out better than expected, with the U.S. economy adding 390,000 jobs in May. This is good news considering recession fears due to rising inflation. The unemployment rate stayed at 3.6 percent, which is just above the lowest level since December 1969.

Economists had expected nonfarm payrolls to increase by 328,000 for May. The total job number for May was lower than the revised 436,000 in April, making this the lowest monthly gain in jobs since April 2021.

Despite the good job numbers, total employment remains 440,000 below the pre-Covid level. Labor force participation rose slightly to 62.3 percent, which is 1.1 percent below pre-pandemic levels in February 2020.

The job market continues to be healthy in spite of recession fears, which some say could cause hiring freezes. Hiring is running at more than double the pace that it was in 2018, the last time the Federal Reserve raised rates.

The average hourly earnings increased 0.3 percent from April, which is a little less than the 0.4 percent that was estimated. The year-over-year wage increase of 5.2 percent is in line with expectations.

The good job report could be a sign that there will be no recession in the near future. Good employment numbers are good for consumer spending. And no recession in the last 50 years, other than the pandemic recession, has ever begun with an unemployment rate that was below 4 percent.

The labor market remains tight, with almost two job openings for every unemployed person. The ratio of unemployed people to job openings is 0.5. This ratio was well above 1 when looking back at the recessions of 2001 and 2007.

The Institute for Supply Management Services Index (ISM) report came out at 55.9, down from April’s 57.1. That is lower than the estimate of 56.5, but it still shows expansion. A reading above 50 shows an expansion in activity.

After dropping for the past three weeks, mortgage rates jumped last week. The 30-year fixed mortgage hit 5.36 percent last Monday and climbed to 5.47 percent on Tuesday. The current rate for a 30-year fixed-rate mortgage is around 5.39 percent.

Applications for mortgages continue to drop, down 1 percent last week compared to the previous week. Mortgage demand is now at the lowest level since December 2018. Volume is now 14 percent lower than the same week one year ago.

Even though there are fewer mortgage applications, home prices continue to rise because of the continuing low supply of homes on the market. Of course, those buying homes with all-cash offers aren’t applying for mortgages.

The market’s long losing streak finally ended last week, with all major market indexes moving higher. The week started on a down note, with negative reports about corporate outlooks and home sales. By Tuesday morning, all the indexes were in the red, with the Nasdaq ending the day down another 2.3 percent. The markets turned around on Wednesday, possibly due to oversold conditions, selling exhaustion and some positive retail earnings reports.

The market rallied on Friday, with the Dow Jones Industrial Average finishing up 575.55 points or 1.8 percent. The S&P 500 rose 2.5 percent, and the Nasdaq jumped 3.3 percent for the day.

Thanks to gains on Thursday and Friday, the major market indexes closed higher for the week. The Dow closed the week with a 6.2 percent gain, ending its longest losing streak of eight weeks since 1923.

For the week, the S&P 500 was up 6.6 percent, and the Nasdaq gained 6.9 percent, which ended a seven-week losing streak for both indexes, their longest losing streak since 2001.

For the year, the Dow is down 7.8 percent, the S&P 500 is lower by 12.2 percent, and the Nasdaq is still down 22.2 percent.

Wednesday afternoon, the minutes from the recent U.S. Federal Reserve meeting were released. As they stated earlier in the month, they are prepared to raise interest rates quickly to fight inflation. They are now likely to raise interest rates by 50 basis points at its next two meetings. They indicated that their policy could move past a neutral stance and become more restrictive.

A neutral stance means that they are neither supportive nor restrictive of growth. A restrictive stance means that the central bankers could move interest rates to a level beyond neutral, a move that could restrict economic growth.

Currently, the markets are pricing in a rate of 2.5 percent to 2.75 percent by the end of the year. Becoming restrictive could push rates even higher. The markets took the news of two consecutive 50 basis point hikes as a signal the Fed might end the rate hikes later in the year. If so, this could show a bottom forming in the markets.

The minutes also indicated that its members are still hopeful they can lower inflation, but they are also concerned about financial stability risks. Furthermore, they indicated that an outright sale of mortgage-backed securities is another possibility. But before that happens, there would be a notice well in advance.

The preferred inflation gauge that the Fed likes to use is the Personal Consumer Expenditures Price Index (PCE). The PCE came in at an annual rate of 6.3 percent for April, down from 6.6 percent in March.

The Core PCE, taking out food and energy, increased by 4.9 percent, which matched the estimates, and was down from 5.2 percent the previous month.

The first-quarter GDP was slightly worse than expected, with a decline of 1.5 percent compared to the initially reported decline of 1.4 percent. That was the worst quarter for the GDP since the second quarter of 2020, during the pandemic.

The Atlanta Fed GDP Tracker is expecting the second-quarter GDP to show a growth of 1.8 percent. Surging Covid cases and supply chain issues continue to create inflation. The Fed stated they will continue to raise rates until there is evidence that inflation is closer to its target rate of 2 percent.

The bond markets finally calmed, with the 2-year Treasury closing at 2.47 percent. The 2-year attempts to forecast the level of the lending rate two years from now. The 10-year Treasury closed at 2.743 percent.

On Tuesday, it was reported that sales of newly built homes dropped 16.6 percent in April from March, far more than expected, and were down 26.9 percent from April 2021. There has also been a pullback in demand for new housing.

Slower sales have pushed the inventory of newly built homes to jump to a nine-month supply. A six-month supply is considered a good balance between buyers and sellers.

Because of inflation and rising interest rates, home prices remain out of range for many potential homebuyers. The median price of a home sold in April was $450,600, up almost 20 percent from a year ago. The average rate on a 30-year fixed mortgage ended the month at 5.41 percent, up from 4.88 percent at the start of May.