Weekly Economic Update for May 23, 2022

In this week’s recap: Recession concerns rising.

Weekly Economic Update

THE WEEK ON WALL STREET

Recession fears grew last week following weak earnings reports from major retailers, sending stocks lower.

The Dow Jones Industrial Average fell 2.90%, while the Standard & Poor’s 500 lost 3.05%. The Nasdaq Composite index dropped 3.82% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 0.84%.^1,2,3

TRENDING LOWER

Stock prices remained in a downtrend, capped by a sell-off on Wednesday following a succession of disappointing earnings reports from several major retailers. Despite solid April retail sales and industrial production data, weak economic numbers from China and shrinking profit margins at U.S. retailers fanned recession fears throughout the week.

Rising yields, which have been an overhang to the markets in recent weeks, turned lower as investors appeared to move cash to bonds from stocks. But lower yields did not help stock prices, which closed out the week with a volatile trading session.

CLOUDY PICTURE WITH RETAILERS

Investors received a mixed message from the retail sector. April’s retail sales increased 0.9% from March, signifying that consumer spending remained strong. But it was difficult to determine from the retail sales report whether the increase was a function of higher retail prices or a resilient consumer.⁴

It was also a big week for earnings reports from some of the nation’s largest retailers. Results were disappointing as retailers struggled with supply chain issues, higher costs, and misaligned product mix. Some retailers indicated a drop in the number of transactions, suggesting that shoppers reduce purchases due to higher prices on essential items.

T I P O F T H E W E E K

Check your credit report annually for errors. (They are not uncommon.) Under federal law, you are entitled to a free annual credit reports from the big 3 credit reporting agencies (Equifax, Experian and TransUnion) each year.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Purchasing Managers’ Index (PMI) Composite Flash. New Home Sales.

Wednesday: Federal Open Market Committee (FOMC) Minutes. Durable Goods Orders.

Thursday: Gross Domestic Product (GDP). Jobless Claims.

Friday: Consumer Sentiment.

Source: Econoday, May 20, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Zoom Video Communications (ZM).

Tuesday: Best Buy Co., Inc. (BBY), AutoZone, Inc. (AZO), Intuit, Inc. (INTU).

Wednesday: Nvidia Corporation (NVDA), Snowflake, Inc. (SNOW).

Thursday: Costco Wholesale Corporation (COST), Marvell Technology, Inc. (MRVL), Workday, Inc. (WDAY), Dollar General Corporation (DG), Dell Technologies, Inc. (DELL), VMware, Inc. (VMW).

Source: Zacks, May 20, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Q U O T E O F T H E W E E K

“It takes a very long time to become young.”

PABLO PICASSO

T H E W E E K L Y R I D D L E

Two trains are crossing America from coast to coast, traveling over 3,000 miles of track. The Gentle Zephyr is going west at 70mph; the Western Wind is headed east at 80mph. So which train will be closer to the east coast when they roll by each other in Kansas?

LAST WEEK’S RIDDLE: Name two words in the English language that have the letter I twice in the middle of the word?

ANSWER: Skiing, taxiing.

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CITATIONS:

1. The Wall Street Journal, May 20, 2022

2. The Wall Street Journal, May 20, 2022

3. The Wall Street Journal, May 20, 2022

4. The Wall Street Journal, May 17, 2022