A Friday rebound, triggered by a big tech company’s earnings beat and a strong jobs report, shaved much of the week’s accumulated losses. The Dow Jones Industrial Average fell 1.24%, while the Standard & Poor’s 500 lost 0.80%. The Nasdaq Composite Index was flat (+0.07%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.62%.1,2,3
Renewed regional bank concerns weighed on investor sentiment last week, despite the rescue of a troubled bank before the start of the trading week. But worries were not isolated to regional banks. Secretary of the Treasury Janet Yellen commented that the federal government may hit its debt ceiling earlier than expected, heightened investor jitters over a potential technical default. The stock market also slipped in the wake of the latest rate hike decision by the Federal Open Market Committee (FOMC). Solid earnings from one mega-cap tech firm and a strong employment report steadied investors, resulting in a Friday bounce that ended a volatile week on a positive note.
Amid concerns in the regional bank sector and tightening credit conditions, the Fed elected to increase interest rates by 0.25%, citing elevated inflation and robust job gains. Investors were more focused, however, on what the Fed signaled about its plans since the expected rate hike. The Fed indicated it may pause further rate hikes, suggesting that future decisions will be based on economic data and prevailing financial conditions. Following the announcement, interest rate traders assigned an 89% probability that rates would remain unchanged following the next meeting of the FOMC in June.4, 5
1. The Wall Street Journal, May 5, 2023, 2. The Wall Street Journal, May 5, 2023, 3. The Wall Street Journal, May 5, 2023, 4. The Wall Street Journal, May 3, 2023, 5. CMEGroup.com, May 3, 2023