Weekly Economic Update – 7/5/22

The Week on Wall Street

Stocks turned lower as a quiet news week offered investors little fresh visibility into the market overhangs of economic slowdown and inflation.

The Dow Jones Industrial Average dipped 1.28%, while the Standard & Poor’s 500 fell 2.21%. The Nasdaq Composite index dropped 4.13%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.49%.1,2,3

Rebound Fizzles

Stocks struggled last week amid poor market liquidity typical of the summer months and a news vacuum ahead of the second-quarter earnings reports. Investors also appeared to be anticipating guidance at the July Federal Open Market Committee meeting. What little news there was proved generally disappointing. A steep decline in consumer confidence preceded Fed Chair Powell’s acknowledgment that inflation may persist.

Stocks stumbled after a profit warning from a high-end retailer, which highlighted recession risks. The sentiment suffered from a 4.7% increase in the core personal consumption expenditures index, which is the Fed’s preferred measure of inflation. It remained near levels not seen since the 1980s. 4

Consumer Confidence Wanes

The Conference Board’s Consumer Confidence Index declined to its lowest level since February 2021, falling from 103.2 in May to 98.7 in June (1985=100). While consumers’ assessment of current conditions slipped only marginally, their short-term outlook for income, business, and labor market conditions eroded substantially, touching its lowest level since March 2013.5

This rising pessimism about the short-term outlook was especially notable in consumers’ assessment of financial prospects, with 15.9% expecting their incomes to increase (down from 17.9% in May) and a growing share of individuals expecting their incomes to decrease (15.2% in June vs. 14.5% in May).6

T H E   W E E K L Y   R I D D L E

It weighs nothing, but when you put it into any container it makes the container lighter. What is it?

LAST WEEK’S RIDDLE: In a drawer are six pairs of red socks, four pairs of white socks and five pairs of blue socks. In total darkness, how many socks would you have to grab to be certain you had a matching pair?  

ANSWER: Four socks. Four is the maximum number you’d need to pull to ensure you had at least two socks that matched. (Don’t believe it? Give it a try!)

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