Equity markets had fresh enthusiasm for last week in four days of trading. Will recent developments give equity markets a tailwind?
Monday
S&P 500 1.65% | NASDAQ 3.07%
Equities leaped into the trading week, with gains in technology outpacing all other sectors. Momentum after the SpaceX IPO last Friday fueled enthusiasm early. Oil features also fell as the Straight of Hormuz was navigable but awaiting full reopening.
Tuesday
S&P 500 0.57% | NASDAQ 1.15%
Trading on Tuesday retreated as the first day of meetings for the Federal Reserve kicked off. Wednesday will be the first presser for new Chairman, Kevin Warsh, and the board decision on interest rates. The Dow climbed into record territory in a rotation to value stocks. indicating rates are likely going to stay elevated.
Wednesday
S&P 500 1.21% | NASDAQ 1.34%
Federal Reserve decision day and markets responded with a risk-off trade as Retail Sales data strengthened in May. Interest rate sensitive sectors and growth pulled back while treasury yields surged. The Fed dot plot showed that 9 out of 19 committee members anticipate at least one rate hike before year-end.
Thursday
S&P 500 1.08% | NASDAQ 1.91%
Equities recovered yesterday’s losses as semiconductor stocks led the way. A calm has started to settle energy markets as the memorandum was signed to terminate military operations in Iran. Growth stocks advanced ahead of the long weekend as the 3-month long operation could be ending.
Friday
S&P 500 0.00% | NASDAQ 0.00%
Markets Closed
Conclusion
S&P 500 0.93% | NASDAQ 2.43%
This week was shortened due to the Federal Holiday on Friday, with banks, government offices, and markets all closed. Markets, by end of trading on Thursday, approved of developments abroad as volatility measures (VIX) fell. The resolution signed late Wednesday sent major indexes higher while commodities sunk. The Federal Reserve is now under new leadership as chairman Warsh has shifted to a targeted 2% inflation goal. The shift from his predecessor’s forward guidance approach to less commentary is a change for analyzing future rate decisions. The “Dot-Plot”, mentioned earlier, is released by the Federal Reserve showing members judgement on rates in the future. Chairman Warsh did not submit a projection in the Dot-Plot in a shift away from projective forward guidance. Economists deem this as a data-driven approach while markets interpret this as markets respond efficiently in real time. A renewed enthusiasm prompted by less volatility in energy markets could provide more wind in equity markets’ sail
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