Chief Economist Scott Brown discusses the latest market data.
As expected, the Federal Open Market Committee raised the target range for the federal funds rate by 50 basis points (to 0.75-1.00%), indicated that it anticipates “ongoing increases” in rates at future policy meetings, and announced the start of balance sheet reduction (“quantitative tightening”). Asked about the possibility of more aggressive action, Chair Powell said a 75-bp hike “is not something the committee is actively considering.” Stock market participants were briefly encouraged by Powell’s comments, but remain concerned about that weaker economic growth (or a recession) may be necessary to bring inflation down.
Nonfarm payrolls rose by 428,000 in April, about as expected, while the unemployment rate held steady at 3.6%. Job openings rose to a record 11.5 million in March, while 4.5 million workers quit their jobs. The ISM Manufacturing and Services Indexes both edged down in April, with details indicating strong demand, supply constraints, and elevated inflation pressures. The ADP Employment Report showed increased hiring and retention problems for small firms. Unit motor vehicle sales rose 6.6% in April (vs. March), but remained 21.9% below the level of a year earlier (reflecting supply constraints in production).
Next week: the economic focus will be on the April CPI report. A decline in gasoline prices (relative to March) will be amplified by the seasonal adjustment, leading to a more modest gain in the headline inflation figure, while sharp gains from a year ago will fall off the 12-month calculation (reducing the year-over-year inflation rate). Stock market participants could celebrate “peak inflation” being behinds us, but supply/demand imbalances continue, inflation pressures remain elevated, and the Fed will continue to tighten monetary policy
|Last||Last Week||YTD return %|
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.236||1.310|
|Dollars per Euro||1.054||1.201|
|Japanese Yen per Dollar||130.210||109.210|
|Canadian Dollars per Dollar||1.284||1.227|
|Mexican Peso per Dollar||20.231||20.258|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||4.31||3.49|
As of close of business 5/5/2022
|May 11||—||Consumer Price Index (April)|
|May 12||—||Jobless Claims (week ending May 7)|
|—||Producer Price Index (April)|
|May 13||—||Import Prices (April)|
|—||UM Consumer Sentiment (mid-May)|
|May 17||—||Retail Sales (April)|
|—||Industrial Production (April)|
|May 25||—||FOMC Minutes (May 3 to 4)|
|May 30||—||Memorial Day (markets closed)|
|June 15||—||FOMC Policy Decision|
All expressions of opinion reflect the judgment of the author and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
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Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business May 5, 2022.