- The S&P 500 showed a 0.9% year-to-date total return as of last Monday
- The Federal Reserve signaled plans to keep rates near zero through at least 2022
- The Consumer Price Index fell 0.1% in May from the prior month
Top Three Market Headlines
Stocks Recoup Yearly Losses Before Faltering: Riding a swift and forceful rebound since its late-March lows, the S&P 500 Index for a brief period early last week had amazingly recouped the significant losses it endured in the first quarter market crash. After closing at a level of 3,232 last Monday, the S&P 500 showed a year-to-date total return of 0.9%, and the Nasdaq Composite Index also hit a record high on the same day. The rally has been keyed by, among other factors, anticipation of improving economic data as an increasing portion of the U.S. economy reopens. The market’s recovery was stunted, however, later in the week, as the S&P 500 fell nearly 6% on Thursday, reflecting the continued instability and volatility of markets as investors digest on-going developments related to COVID-19 case data, reopening plans, and economic indicators.
Federal Reserve Remains Dovish: The Federal Reserve last week reinforced its commitment to aggressive monetary stimulus measures to assist the U.S. economy’s recovery. For one, the Fed signaled its plans to keep interest rates near zero through at least 2022; Chairman Jerome Powell was quoted as saying “We’re not even thinking about raising rates.” In addition, the Central Bank announced it would maintain the current pace of asset purchases at $80 billion in Treasuries and $40 billion in mortgage securities a month, and reiterated its commitment to “using our tools to do whatever we can and for as long as it takes to provide some relief and stability.”
Inflation Remains Restrained: Inflation pressures in the U.S. remained subdued in May, according to two monthly price gauges released last week by the Bureau of Labor Statistics. The Consumer Price Index (CPI) fell 0.1% in May from the prior month, its third consecutive monthly decline, driven by a 3.5% drop in the price of energy, which more than offset increases in food and shelter indexes. The core CPI, which excludes the volatile food and energy categories, also declined 0.1% from the prior month. Compared to the prior year, the measures rose just 0.1% and 1.2%, respectively: for the latter, it was the smallest year-over-year increase since March 2011.