US stocks added to their previous week’s gains to end the best month since 2020, as Fed Chairman Powell’s comments led investors to believe the pace of rate hikes may be easing. The S&P 500 increased by 4.3% and the Dow gained 3.0% for the week. Foreign markets also experienced gains with the FTSE All World Ex US up 1.7% for the week. US crude increased to $98.62 per barrel up from $94.70 the week prior. The yield on the 10-year Treasury fell to 2.64% down from 2.78% the week prior, their lowest level since early April.
The Fed agreed to raise its benchmark federal funds rate by 0.75%, in line with expectations, to a range between 2.25% and 2.5%. Chairman Jerome Powell said it was too soon to say how the rate path would evolve, but he pointed to projections officials submitted last month showing they expected to raise the fed-funds rate to around 3.5% this year and 4% next year. Powell stated, “These rate hikes have been large, and they’ve come quickly and it’s likely that their full effect has not been felt by the economy.” When asked if he thinks the economy is in a recession he said “I do not think the U.S. is currently in a recession. There are just too many areas of the economy that are performing too well.”
The U.S. economy contracted for a second consecutive quarter, a common definition of recession. Gross domestic product fell at an inflation and seasonally adjusted annual rate of 0.9% in the second quarter. That follows a 1.6% contraction in the first quarter of 2022.
Personal income grew by 0.6% in June, slightly above the consensus of up 0.5%. June’s increase matched the revised 0.6% increase in May.