John Hancock: Weekly Market Recap Week Ended May 22

Mag 7 earnings

The outsize impact that mega-cap tech companies are having on the broader market’s earnings became more apparent after the last of the so-called Magnificent Seven stocks reported quarterly results. Those seven firms recorded average first-quarter earnings growth of 63%, versus 17% for the other 493 companies in the S&P 500 Index, according to FactSet. For the Mag 7, it was the highest quarterly growth rate in nearly six years.

Fed rate outlook

Minutes released on Wednesday from the U.S. Federal Reserve’s most recent meeting showed that policymakers were considering keeping rates unchanged longer than previously expected while also considering rate hikes if inflation remains high. A majority of Fed members said that a shift to more restrictive monetary policy would likely become appropriate if inflation remains above the Fed’s long-term 2% inflation target.

Bond volatility

The recent rise in inflation-driven bond market volatility peaked on Tuesday, when the yield of the 30-year U.S. Treasury closed at 5.18%, the highest since 2007. While yields slipped later in the week, they remained elevated, with the 10-year Treasury ending the trading week at 4.56%, the highest in 12 months.

Small-cap surge

A U.S. small-cap benchmark outperformed its large-cap peer by a wide margin, extending small caps’ year-to-date outperformance. The small-cap index rose 2.7% for the week versus a 1.1% gain for the large-cap benchmark.

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