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| By Kenny Polcari |
Welcome to another episode of Wealth & Wisdom! Let’s get into what happened in the markets last week.
Stocks moved higher again on Friday, as all the indices are up higher, building on the momentum from Thursday when we saw the market rising.
The market has seemingly disregarded the narrative of higher rates for longer. This is because the market is convinced that while the data remains strong, the lag effects of the past 10 rate hikes are causing the current narrative.
In fact, data on Friday morning revealed that the services sector of the U.S. economy remains hot and is getting hotter with each passing month. S&P Services Purchasing Managers’ Index came in at 50.6, while the ISM Services PMI came in 55.1 — putting both of those data points in expansionary territory.
Looking at these data points — along with continued labor market strength — does support the case for ongoing rate tightening. But the most recent comments by Federal Reserve officials seem to suggest that the Fed could pause rate hikes sometime this summer. This is not news, as we are expecting the Fed to take a pause in June.
In addition, most Fed members seem to agree that the 6% terminal rate is already baked in. So, anything less than 6% is a bonus and would be considered dovish — hence the move higher in stocks.
By the end of the day on Friday, the Dow Jones Industrial Average gained 388 points, the S&P 500 was up by 65 points, the Nasdaq was ahead by 225 points, the Russell gained 25 points and the Transports gained 70 points.
Plus, nearly every sector was in the green on Friday. And as you might expect, money was piling into the worst-performing sectors of 2022 — namely tech, consumer discretionary and communication — because they are so oversold, investors figure there are likely some opportunities there.
This all brings us to …
The Week Ahead
This week, we will be getting some all-important economic data, including the biannual Humphrey Hawkins testimony. This is when the Fed chair appears before both the Senate Finance Committee and the House Financial Services Committee to opine on the state of the union.
It will be interesting to hear what will be said at this testimony, along with the questions asked by the Senate and House members.
Additionally, we will be getting data on factory orders, durable goods orders and capital goods orders. We are also getting the Automatic Data Processing Employment Report and the Job Openings and Labor Turnover Survey on Wednesday, as well as the all-important nonfarm payroll report on Friday.
I go into more detail about last week’s data and market action as well as this week’s data and expectations all down below, so make sure you don’t miss it!
Click here to watch the video.
Click here to get my rundown and be sure to check your inboxes tomorrow for the next installment of my weekly video interview series, Wealth & Wisdom.
To your Wealth & Wisdom,
Kenny Polcari
Host
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