The stock market in the United States fell again this week, owing to mounting fears that the US economy may enter a recession as the Federal Reserve raises interest rates more forcefully to combat rising inflation. The Federal Reserve hiked the federal funds rate by 75 basis points (bps), or three-quarters of a %age point, on Wednesday, the highest rate increase since 1994. The Dow and Nasdaq fell 4.8 % this week, while the S&P 500 fell 5.8 %. Growth and procyclical equities, primarily in the technology and travel industries, led the declines. Meanwhile, the 10-year Treasury note yield increased to its highest level since 2011, hitting 3.49 % intraday on Tuesday before completing the week at 3.23 %. Crude oil prices fell for the first time in a week since April, as concerns about a global recession led to lower demand for the commodity. The week ended with West Texas Intermediate (WTI) crude closing at $109 a barrel.
The following week will be a shorter trading week due to the United States' Juneteenth holiday on Monday. On Wednesday and Thursday, Fed Chair Jerome Powell will testify before Congress as part of his semiannual monetary policy testimony. We can expect crucial housing market information, such as new and existing house sales data for the month of May. On Thursday and Friday, S&P Global's Composite PMI Survey's June flash estimate and the final reading of the University of Michigan's Consumer Sentiment Index (MSCI) will be revealed, respectively. Inflation data for the United Kingdom and Japan, as well as consumer confidence figures for the United Kingdom and the eurozone, are all expected. Accenture, FedEx, Darden Restaurants, Rite Aid, and CarMax are among the companies that will report earnings for the quarter ending in May.
Asset Classes by Year-to-Date Total Return
TAKEAWAYS IMPORTANT
- In a two-day semiannual testimony on monetary policy, Federal Reserve Chair Jerome Powell will address Congress. Powell is scheduled to speak before the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday.
- On Tuesday and Friday, respectively, more housing market data will be provided, this time focusing on existing and new home sales in May.
- Friday will see the release of the final reading of the University of Michigan's Consumer Sentiment Index (MSCI), which covers the month of June.
Monday, June 20th
- U.S. Markets Holiday (Juneteenth)
Tuesday, June 21:
- Sales of Existing Homes (May)
- Wednesday, June 22nd, Chicago Fed National Index (May)
Wednesday, June 22
- Stellantis (STLA) releases earnings
- Fed Chair Powell Testimony before Congress (U.S. Senate Banking Committee)
- Inflation Rate in the United Kingdom (May)
- Consumer Confidence in the Eurozone (June)
- Fed Chair Powell documents earnings from Accenture (ACN), FedEx (FDX), Darden Restaurants (DRI), BlackBerry (BB), and Rite Aid (RAD). Testimony given before Congress (House Financial Services Committee)
- S&P Flash Estimate of the Global Composite PMI (June)
- Consumer Confidence in the United Kingdom (June)
- Inflation Rate in Japan (May)
- Paychex (PAYX) and CarMax (KMX) both declare earnings in the United Kingdom (May)
- Sales of New Homes (May)
- Final Reading of the Michigan Consumer Sentiment Index (June)
Fed Chair Powell to Address Congress
Federal Reserve Chair Jerome Powell will give a two-day semiannual hearing on monetary policy before the US Congress on Wednesday and Thursday. Powell will speak before the Senate Banking Committee and the House Financial Services Committee on Wednesday and Thursday, respectively. Powell's speech on Capitol Hill will come a week after the Federal Reserve raised its benchmark federal funds rate by three-quarters of a %age point, the highest rate hike in 28 years. In recent months, combating excessive inflation has risen to the top of the Federal Reserve's priority list, and Chair Powell is certain to include it in his impending address to Congress.
May Home Sales Updates
The National Association of Realtors (NAR) will announce its May existing home sales data on Tuesday, with sales expected to drop to 5.4 million in May from 5.61 million in April. This is down from a pandemic-era high of 6.65 million in January 2021, and it would be the lowest amount since June 2020, as homeowners are squeezed by rising mortgage rates and falling affordability. The latest data on new home sales for May will be released by the US Census Bureau later this week. The number of new homes sold in May is expected to be 580,000, down from 591,000 in April. This would be the lowest point ever.
June Consumer Sentiment Reading
The final measurement of the University of Michigan's June Consumer Sentiment Index will be released next Friday (MSCI). Consumer sentiment fell to a new low in the preliminary reading, which was issued last week. The current index reading of 50.2, which dates back to 1952, is the lowest in the index's history. In recent months, rising prices, particularly for gasoline and food, have dampened consumer mood. Consumer confidence indicators for June in the eurozone and the United Kingdom are scheduled for release on Wednesday and Thursday, respectively.