Inflation has become a recurring theme in my comments due to a notable rise in inflation metrics and how they have affected the S&P 500 (SPY). The Fed has consistently spoken of inflation being transitory over the past couple of months, which has resulted in investors becoming less concerned over higher prices. But it appeared that the Fed reversed course as it is now, indicating it would raise rates ahead of schedule. This created more volatility in the markets leading to a tough day on Friday. But, if you look closer at their remarks, not everything is as it seems. I will expand on my point below. But first, let's recap the past week in the markets. Read on below….Stocks finished lower last Tuesday after investors digested a slew of economic data ahead of Wednesday's Fed decision. The S&P 500 and Nasdaq composite fell from their record closing levels. Retail sales fell more than expected in May, as consumers spent less on big-ticket items such as cars, and producer price index data came in higher than expected, which stoked inflation fears.
The market closed down on Wednesday after the Fed signaled it expects to increase the benchmark lending rate ahead of schedule. Though the Fed kept interest rates and asset purchases the same for the time being. Fed Chair Jerome Powell indicated that support would stay in place in his post-meeting press conference.
On Thursday, stocks continued a rotation into growth-oriented names as investors didn't seem too bothered by the unexpected shift from the Federal Reserve. Initial jobless claims rose to 412,000, higher than the expected 359,000 and last week's 375,000. This rise isn't too concerning, though, as initial claims are expected to continue to decline over the medium term.