Mid-Week Market Minute 06.15.22

Stocks pared losses in a strong rally on Wednesday following a tumultuous start to the week. Higher-than-expected inflation data last week led to a sharp sell-off in stocks across the board earlier this week. After slipping into bear market territory, the S&P 500 rallied on the conclusion of the Federal Reserve’s two-day meeting.

On Wednesday afternoon, the Federal Reserve announced it would raise rates by 75 basis points, in line with the markets’ expectations. There was a tremendous amount of investor angst leading up to the meeting in the face of the highest inflation in decades. However, Federal Reserve Chair Jerome Powell managed to signal confidence to the markets the central bank is committed to stomping inflation. Looking forward to the central banks next meeting in July, Powell noted “either a 50-basis point or a 75-basis point increase seems most likely” and “the pace of those changes will continue to depend on incoming data and the evolving outlook on the economy.” Interest rates rallied for the week, with the yield on the 10-year Treasury note jumping more than 0.25% to around 3.40% mid-week.

On the data front, the Producer Price Index (PPI) climbed 0.8% in May, in line with expectations. Year-over-year, PPI eased for a second month to 10.8% after hitting a record 11.5% annual gain in March. U.S. retail sales fell 0.3% in May, against expectations for a modest gain of 0.1%. In addition, the manufacturing index contracted for the second consecutive month in June. Data from the National Association of Home Builders showed home builders sentiment declining for the sixth consecutive month, largely due to significantly higher mortgage rates. However, MBA mortgage applications rose 6.6% last week following a decline of 6.5% in the prior period.

Source: GSAM, CNBC, JPMorgan