John Hancock: Weekly Market Recap Weed Ended May 6th
How high, how fast?
As expected, the U.S. Federal Reserve approved an interest-rate increase of half a percentage pointꟷtwice as big as March’s quarter-point hike. While further increases are still to come, Chair Jerome Powell said the central bank wasn’t considering sharply raising rates in increments of three-quarters of a percentage point at a time.
Prices of government bonds fell, sending the yield of the 10-year U.S. Treasury Bond surging late in the week. The yield jumped from 2.92% to 3.07% on Thursday before climbing to 3.13% on Friday, the highest level since November 2018. As recently as mid-2020, the yield was around 0.50%.
Earnings performance continued to improve, as first-quarter profits at companies in the S&P 500 were expected to increase about 9%, based on companies that have reported so far and forecasts for firms that haven’t yet released earnings, according to FactSet. That’s up from the 7% rise that had been projected at the end of the previous week. About 87% of companies had reported results as of Friday.
A Consumer Price Index report scheduled to be released on Wednesday will show whether the U.S. economy got any relief in April from surging inflation. A month earlier, the government reported that inflation accelerated in March at an 8.5% annual rate—the highest since 1981—eclipsing the previous month’s 7.9% figure.