Market Pulse

In focus

Equities rallied in an action-packed week with the S&P 500 up over 2.5%. Technology stocks helped push the index to its fifth-straight weekly gain amid a flurry of key events highlighted by the Federal Reserve’s (Fed) policy decision.

Central banks were active around the world last week as policymakers have begun taking different approaches; the European Central Bank continued its tightening campaign, while the Chinese and Japanese bodies were more dovish. In the U.S, the Fed’s decision to pause was received well by investors after ten-straight hikes that have pushed interest rates up 5%. Despite holding steady, officials indicated more action is likely with 12 of 18 members projecting an increase in rates by at least another 0.50%, and Chair Powell striking a hawkish tone in his press conference. However, markets are skeptical, only pricing in one more increase this cycle.

While holding rates steady, Fed officials focused on fresh economic readings including inflation and retail sales data. Though headline consumer prices rose at their slowest pace in over two years, officials were likely disappointed by stubbornly-high core inflation, which excludes the volatile food and energy components. Meanwhile, healthy retail sales data indicated the U.S. consumer remains strong and the University of Michigan’s measure of consumer sentiment is at its highest point since February. 

A look back

• Equities rose sharply, with both U.S. and international stocks gaining more than 2%.
• The 2-year U.S. Treasury yield rose after the Fed signaled it expects more rate hikes. The 2-/10-year inversion deepened to -0.95%, its deepest since early March.
• Inflation data showed overall price pressures continued to ease, while year-ahead inflation expectations fell to 3.3%, the lowest level since March 2021.

A look ahead

• Numerous Fed officials will take the stage this week, highlighted by Fed Chair Powell speaking before Congress.
• Investors will get an updated look into the housing market given the amount of housing data in focus this week as they continue to digest trends in this area of the economy.
• Economic releases: Housing Starts, Building Permits, Existing Home Sales, Leading Index, S&P Global U.S. Manufacturing & Services.

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