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Stocks Bounce Off Recent Lows as S&P Hits Bear Market Territory

Weekly Update – June 24, 2022

  • The S&P 500 index rose 6.4% last week as stocks began bouncing off the previous week’s lows when the market benchmark entered bear market territory amid inflation concerns.
  • The S&P 500 ended Friday’s session at 3,911.74, up from last week’s closing level of 3,674.84. This marks the index’s first weekly advance since the week that ended May 27. Even with last week’s gain, the S&P 500 is down 5.3% for the month of June. With just four sessions remaining in the month as well as the first half of 2022, the index is down 18% for the year to date.
  • Last week, the index entered bear market territory as the Federal Reserve’s Federal Open Market Committee made a larger-than-expected increase in its benchmark interest rate following higher-than-expected inflation figures reported earlier this month. Investors have grown increasingly worried about whether the central bank will be able to achieve a “soft landing,” in which rate increases curbed inflation without sending the economy into a recession.
  • Last week, in testimony to the House Financial Services Committee, Fed Chairman Jerome Powell said a recession is possible and a soft landing would be “very challenging.” He also said the central bank would be reluctant to shift to cutting rates without clear evidence that inflation “really is coming down.”
  • Nevertheless, most US sectors rose last week, led by the consumer discretionary sector, which climbed 8.2%, and health care, which added 8.1%. Real estate was also strong, up 7.7%, followed by a 7.3% gain in technology, a 7.2% rise in utilities and a 7% climb in communication services, among other gainers. Energy, which slipped 1.6%, was the only sector in the red.
  • In the consumer discretionary sector, Carnival (CCL) said it expects to turn a core profit in its current fiscal third quarter, driven by a boost in demand for cruising following an easing in COVID-19 protocols. Shares of Carnival jumped 13% on the week.
  • The health care sector’s gainers included AbbVie (ABBV), whose shares rose 10% as the company said it has submitted a supplemental new drug application for atogepant to the US Food & Drug Administration for the preventive treatment of chronic migraine in adults. Atogepant, which is marketed as Qulipta in the US, is already FDA-approved to treat adults with episodic migraine.
  • In real estate, shares of American Tower (AMT) climbed 11% as JPMorgan upgraded its investment rating on the stock to overweight from underweight while boosting its price target on the shares to $285 from $245. American Tower was also named one of Credit Suisse’s top five picks among 35 outperform-rated stocks across its REIT coverage universe.
  • On the downside, the energy sector’s drop came as crude oil futures fell on the week. Among the decliners, Marathon Oil (MRO) shares shed 8.7% and Devon Energy (DVN) lost 7.3%.
  • Next week, as June and the first half of 2022 conclude, investors will be looking at data showing May pending home sales and durable goods orders on Monday, the June consumer confidence index on Tuesday, revised Q1 gross domestic product on Wednesday, May personal consumption expenditure inflation and consumer spending data due Thursday, and June manufacturing data due Friday.
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