Week in Review: July 29, 2022

Markets ended the week higher despite another 0.75% Federal Reserve rate hike and 2Q GDP data, both of which falls into a common definition of recession. Positive earnings reports from some leading companies and the sense that the Fed might take a more nuanced approach to future rate hikes helped propel the markets to their best week since late June. The 10-Year Treasury yield ended the week at 2.67%, its lowest level since early April and down 0.80% from a recent high of 3.47% in mid-June. The decline reflected ongoing concerns about slowing economic growth as well as evolving views regarding monetary policy.

As expected, the Fed raised rates by 0.75% at its July meeting to a new range of 2.25-2.50%. In its accompanying statement, the Fed acknowledged that “recent indicators of spending and production have softened” before noting ongoing strength in the labor market. Speaking afterward, Fed Chair Jay Powell stated that the Fed should approach future rate decisions on a meeting-by-meeting basis rather than providing more explicit forward guidance. In addition, Powell seemed to imply that the Fed might not continue to raise rates as aggressively as expected, noting a cumulative impact of the recent hikes that has yet to be felt by the economy.

Through Friday, 56% of S&P 500 companies had reported earnings, and 73% of companies have exceeded their earnings estimate. Aggregate earnings growth for 2Q22 is forecasted to be 6.0%, according to industry group FactSet.