The Week on Wall Street
A record-high inflation report, the prospects of a more aggressive Fed, and growing recession fears sent stocks lower– though a Friday rally pared losses.
The Dow Jones Industrial Average slipped 0.16%, while the Standard & Poor’s 500 lost 0.93%. The Nasdaq Composite index dropped 1.57% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 3.49%.1,2,3
As the week opened, recession fears intensified with reports of renewed Covid-related lockdowns in China. Also, the U.S. dollar continued to climb, reflecting global economic weakness.
June’s consumer price index report showed price increases accelerating. Year-over-year prices jumped 9.1%, the fastest pace in over 40 years. Speculation grew that the Federal Reserve might contemplate a 100 basis point increase in short-term rates later this month rather than the 75 basis point hike it earlier signaled. The market rebounded on Friday following a Federal Open Market Committee member saying he favored a 75 basis point hike. Also helping the Friday rally was a strong retail sales report and additional second-quarter company reports. 4
The increasing strength of the U.S. dollar moved to center stage last week as the dollar index (a measure of the U.S. dollar to six other major currencies) reached a fresh high, while the euro fell to parity with the dollar and to its lowest level since 2002. 5
A rising U.S dollar hurts overseas profits when converted into dollars and it also makes U.S. products and services more expensive. It’s a challenge for large, multinational companies that derive a portion of their earnings from overseas markets. Investors may gain greater insight into the extent of that impact as companies provide forward guidance with their upcoming reports.
T H E W E E K L Y R I D D L E
You have 9 seemingly identical cubes before you. You are told that one is heavier than the other eight. Using a two-pan balance scale only twice, how can you pick out the heaviest cube?
LAST WEEK’S RIDDLE: Two in every corner, one in every room, none in a house. What is it?
ANSWER: The letter “R.”Posted on