Market Perspective for June 19, 2023

Investors were looking to get a better idea as to what the Federal Reserve might do over the next few months. On Wednesday, the Fed decided to keep interest rates at their current level of 5.25 percent. Federal Reserve Chairman Jerome Powell said that doing so would provide additional time to assess the impact that previous hikes had on the economy.

The Federal Open Market Committee (FOMC) will meet again on July 26, and according to projections released at Wednesday’s meeting, there is a strong possibility of an additional one or two rate hikes before a pivot begins. One of the key reasons why additional hikes might be necessary is because monthly core CPI was up .4 percent. Core CPI measures inflation without accounting for food or energy costs.

Until that figure comes down, it may be difficult for overall inflation to reach the 2 percent target set by most of the central banks across the world. However, the inflation news was not all bad as overall CPI for May was 4 percent, which was the lowest since 2021 and lower than the 4.1 percent analysts expected.

On Friday, the University of Michigan released its preliminary inflation expectations for the next 12 months. It found that those who took its survey believe that inflation will fall to 3.3 percent over the next year. This is important as consumers may be less likely to pay higher prices if they believe that they are going up for no reason.

Of course, data indicates that consumers aren’t hesitating to spend even as prices continue to go up. On Thursday, retail sales and core retail sales data were released, and both reports showed that there was an increase in spending. Retail sales were up .3 percent on a monthly basis while core retail sales were up .1 percent on a monthly basis. Analysts believed that retail sales would fall by .2 percent.

The Empire State Manufacturing Index was also released on Thursday, and the final figure was 6.6 percent, which indicates that the manufacturing sector in New York is expanding. It was significantly higher than the -15 percent estimate and was also much higher than the -31.8 percent figure seen last month.

Finally, unemployment claim data released on Thursday morning found 262,000 claims had been filed in the previous week. This was the same as last week and was higher than the 246,000 claims that analysts expected.

Although the news this week indicates that the economy is in a state of turmoil, investors were mostly bullish. The S&P 500 was up 2.35 percent on the week after finishing at 4,409 on Friday. The market opened at 4,308 on Monday and steadily climbed over the next four trading days.

The NASDAQ was up 2.77 percent this week closing at 13,689. It started the week at 13,321 and hit its weekly high on Thursday at 13,808 before easing back about 1 percent on Friday. While the Dow 30 finished up about 1 percent this week, it did experience some choppy trading. On Monday, it opened at 33,951 before easing back to its weekly low of 33,834 on Wednesday. By Friday morning, it had hit its weekly high of 34,529 before giving up ground to finish the week at 34,299.

On Wednesday and Thursday, Jerome Powell will testify before the Senate. Manufacturing and services PMI data will be released on Friday.

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