U.S stocks closed sharply higher on Friday, 27th May 2022, led by tech-heavy Nasdaq to finish the week in positive territory.
This is the first positive week in nearly two months.
Most of the week’s gains came on Thursday and Friday, after the release of the Fed minutes which suggested that the Fed was not as hawkish as earlier thought.
While another 50-basis point hike is expected, the minutes indicated that there may be a possibility of a pause to assess the effects of the tightening.
This was a welcome change from last week when Powell commented that the Fed will keep raising rates until inflation is in retreat.
Heading into the long weekend with Monday, 30th May 2022, being Memorial Day, the Nasdaq closed +3.3%, the S&P +2.5%, and the Dow +1.8%.
The Dow Jones index surged 6.2% for the week to snap an eight-week decline, its longest losing streak since 1932, while the S&P climbed 6.5% and the Nasdaq jumped 6.8%, both ending seven-week slides.
Here are the closing levels on Friday, 27th May 2022: –
| Last | Change | %Change | |
| Dow Jones | 33,212.96. | +575.77. | +1.76% |
| S&P 500 | 4,158.24 | +100.40. | +2.47% |
| Nasdaq Comp | 12,131.13. | +390.48. | +3.33% |
| US 10Y | 2.74% | ||
| VIX | 25.72 | -1.78 | -6.47% |
It was a relief not to see another weekly decline in stock prices. It was a bigger relief to see it bounce so strongly.
Global stock funds saw their largest inflows in 10 weeks, led by U.S. shares, according to a Bank of America Corp.’s note citing EPFR data.
With this rebound, more analysts will be calling for the market to bottom out.
Morgan Stanley and Bank of America are warning that there could be more losses to come.
The fact that the market looked for only the positive points in the Fed minutes to justify a rally suggests that investors are tired of selling and want this to be over.
Unfortunately, willing the market to go higher does not guarantee that it will stay higher.
We need more evidence that the Fed will back off and that will only happen if inflation is under control.
The profit warnings from recent earnings releases should give us cause for concern. We may be off the lows but getting to new highs may be a problem and when we find resistance to go higher, it could be an invitation for sellers to step in again.
Going all in and calling a bottom at this point could prove costly.
Source: CBOE, Bloomberg, Federal Reserve
This commentary is written by James Gomes
James has been in the finance industry for over 30 years and most recently worked for a large U.S. bank for more than 20 years.
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