Mid-Week Market Minute 5.3.23

Federal Reserve Makes 10th Interest-Rate Hike

Global stocks were lower in early trading this week following the conclusion of the Federal Reserve’s meeting for May. The central bank voted unanimously to raise interest rates by 0.25%, which marks the 10th interest-rate increase of this cycle. On the heels of the release, the S&P 500 closed Wednesday about 2% lower on the week.

The central bank’s decision to hike rates was widely anticipated by the markets; however, investors quickly shifted their attention to Federal Reserve Chair Jerome Powell’s comments in the news conference that followed. Of particular interest were Powell’s comments on inflation, where he expressed the committee’s view that inflation may still take some time to return to more normal levels. If inflation does take longer than expected to cool, this would indicate the need to keep interest rates higher for longer.

In economic data for the week, private payroll growth from the ADP Employment Report showed jobs increasing by 296,000 in April, well above expectations. This reinforced the Fed’s statement the U.S. economy may be able to avoid a recession, as the U.S. economy has never experienced a recession without a significant increase in jobless claims and unemployment. For the rest of the week, investors will keep a close eye on Friday’s release of the Bureau of Labor Statistics more widely followed nonfarm payrolls report. Analysts expect the U.S. economy added approximately 180,000 jobs in April, below last month’s increase of 236,000.

Source: GSAM, CNBC, JPMorgan

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