The Dow (+1.0%), NASDAQ (2.1%) and S&P 500 (+1.2%) were all up last week, with the Dow and S&P 500 within 1% of their all-time highs reached about three weeks ago. Growth stocks, as represented by the NASDAQ, outperformed their peers for the second week in a row, as the NASDAQ remains about 3% below its peak from late April. Taxable bonds and tax-free municipal bonds also gained about 0.2% - 0.3% for the week.
As noted in prior weekly recaps, the main driver of market volatility has been the fear of inflation, and the associated / potential rise in interest rates. However, the Fed reassured investors last week that they view the recent spike in inflation as being transitory over the next few months, and that this data does not warrant the Fed to make any near term shifts in their monetary policy. In other words, the Fed is implying that they don’t consider the inflation to be long term, and that they won’t be raising interest rates any time soon. This came as a relief to BOTH the bond markets AND stock markets, particularly the NASDAQ and other higher growth companies that are more adversely affected by rising interest rates. Corporate earnings season is almost over, as 97% of companies reported their earnings, and this quarter’s reports were fantastic. The big news this week will be the May jobs report on Friday, so any swing from the expected values may cause a sharp movement in the markets on that day.