Weekly Market Update: August 22, 2022

Market Data as of Week Ending: 8/19/2022 unless noted otherwise
U.S. stock prices ended the week lower, snapping a string of four consecutive weekly gains for the S&P 500 and NASDAQ as investors digested a host of earnings and economic data. The reversal in the market's rally came after the July FOMC meeting minutes revealed policymakers would likely continue to raise rates in the short term. Value stocks held up better than their growth counterparts while large companies outperformed their small and mid-sized peers. The S&P 500 experienced a relatively broad-based pullback amongst its sectors with only traditional defensive sectors, consumer staples and utilities, along with energy recording a gain. Cyclical and sensitive sectors such as communication services, materials, and financials fared the worst. Developed foreign and emerging stock prices moved lower and lagged the U.S. for the week.

U.S. Treasury yields were mixed last week as the Fed minutes impacted monetary policy expectations. The 10-year U.S. Treasury increased to 2.98%, up from 2.85%, as the 2-year remained at 3.24%. Returns were negative across the fixed income spectrum with quality leading to mixed results while shorter duration was positive. Government and corporate bonds outperformed across the short and intermediate duration, while long duration corporate was the worst performing segment. Yields on investment grade and high yield corporate bonds increased, finishing the week at 4.6% and 7.8%, respectively.

Economic releases were mixed for the week as Monday was kicked off by the Empire State manufacturing index recording its second largest decline on record, one of the lowest levels in the survey history at -31.3 in August. The NAHB home builders' index slipped to 49 in August, the first time since May of 2020 that the index broke below the break-even measure of 50, as cooling buyer demand has negatively impacted builders' sentiment. U.S. retail sales were flat in July as cheaper gas prices meant consumers spent less at the pump. The Philadelphia Fed manufacturing index recovered to 6.2 in August from a negative 12.3 last month, suggesting improving conditions. The U.S. leading economic indicators index declined for the fifth month in a row, dropping 0.4% in July, as rising interest rates and pessimism among consumers has dampened the economy. The UK's inflation rate hit 10.1% in July, the first double-digit reading since 1982, while the Eurozone's inflation hit a record 8.9% in July. 

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