2023-05-30 15:14:00 ET
Summary
- The S&P 500 index rose 0.3% during the fourth trading week of May 2023, despite concerns over inflation and potential rate hikes from the Federal Reserve.
- Nvidia's earnings report and outlook sparked a speculative surge in information technology firms focused on artificial intelligence, driving the index higher.
- The CME Group's FedWatch Tool projects a quarter-point rate hike in June 2023, followed by rate cuts starting in November 2023 to address recessionary conditions.
The fourth trading week of May 2023 had started out to be a gloomy one for the S&P 500 (Index: SPX ). Several Federal Reserve officials signaled early in the week they were considering continuing the Fed's ongoing series of rate hikes in June because of their concerns U.S. inflation has not sufficiently abated.
That potential was enough to send the index down nearly 1.9% from the previous week's close by Wednesday, 24 May 2023.
But the fear that dragged stock prices down reversed during the next two trading days, as a "Unprecedented. Cosmological. Unfathomable." earnings report and outlook from Nvidia (NVDA) sparked a speculative fury benefiting information technology firms advancing on the potential of their new Artificial Intelligence ((AI)) systems.
That speculative fury drove the level of the S&P 500 some 2.2% higher from where it bottomed, enough to boost the index by 0.3% from the previous week's close to 4205.45 , its highest level to date in 2023. And that was *despite* Friday, 26 May 2023's confirmation U.S. inflation is running hotter than expected, all but guaranteeing the Fed will hike the Federal Funds Rate in June 2023.
That volatile action is shown in the latest update to the alternative futures chart, where we find the index trajectory is still well within the redzone forecast range.
More stuff happened during the week that was, which we've captured in the week's market-moving headlines. Once again, we've all but omitted headlines related to the debt ceiling debate in the U.S., which still isn't moving the needle for stock prices in any meaningful way.
Monday, 22 May 2023
- Signs and portents for the U.S. economy:
- Fed minions signal rate hikes are coming back on the table, say bank problems aren't over, expect unemployment to rise:
- Bigger trouble developing in Asia:
- ECB minions excited to keep hiking rates higher:
- S&P 500 Rises 0.02% to 4192.63
Tuesday, 23 May 2023
- Signs and portents for the U.S. economy:
- Former Fed minion worries about wage inflation, Fed minions' choice to focus on boosting jobs rather than inflation did damage:
- Growth signs developing in Japan, Eurozone:
- ECB minions urged by German bankers to keep hiking rates:
- S&P 500 Falls 1.12% to 4145.58
Wednesday, 24 May 2023
- Signs and portents for the U.S. economy:
- Fed minions thinking about more rate hikes, starting to get on board with resetting inflation target higher:
- Central bankers reaching the end of the line for rate hikes:
- Wall Street sinks as stocks tumble worldwide
Thursday, 25 May 2023
- Signs and portents for the U.S. economy:
- Fed minions still thinking about pausing rate hikes:
- Bigger trouble developing in the Eurozone:
- BOJ minions thinking about changing up never-ending stimulus as economic outlook improves:
- Wall Street ends higher as Nvidia sparks rush for AI stocks
Friday, 26 May 2023
- Signs and portents for the U.S. economy:
- Oil prices up amid OPEC+ supply cut uncertainty
- US consumer spending surges in April; inflation heats up
- Fitch puts Fannie Mae, Freddie Mac on negative watch as US debt deadline looms
- US core capital goods orders unexpectedly rebound in April
- IMF says U.S. should tighten fiscal policy to help cut persistent inflation
- Fed minions get data to make them rethink pausing rate hikes:
- BOJ minions expected to keep never-ending stimulus alive until sometime in 2024:
- ECB minions getting less worried about inflation:
- Wall Street rallies, European shares see biggest gain in 2 months
Following personal consumption expenditure data that revealed higher than expected inflation, the CME Group's FedWatch Tool now projects the Federal Reserve will hike the Federal Funds Rate by a quarter point when its Open Market Committee meets on 14 June 2023. That would bring the Federal Funds Rate to a target range of 5.25-5.50%, which the tool anticipates will be the peak for the series of rate hikes that began in March 2022. However, the FedWatch Tool anticipates the Fed will then wait until its 1 November (2023-Q4) meeting to initiate a series of quarter-point rate cuts at six- to twelve-week intervals to address building recessionary conditions in the U.S. economy.
The Atlanta Fed's GDPNow tool estimate of the real GDP growth rate for 2023-Q2 plunged to +1.9% from the +2.9% growth rate it anticipated a week earlier.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
The S&P 500 Charges Higher On Promise Of AI Tech