Fed does its thing, so does market

  • Fed gets aggressive, stocks hit new correction lows
  • Energy sector slides with crude oil, Treasury yields pivot
  • This week: Housing numbers (and earnings), consumer sentiment

The Fed may have attempted to jolt the financial playing field with an aggressive attack on inflation, but stocks stuck to their 2022 playbook, falling to new lows amid volatile day-to-day trading.

The S&P 500 (SPX) recouped some of last Monday’s 3.9% loss on Wednesday as the Federal Reserve announced its largest rate increase in nearly a generation. But Thursday’s 3.3% downside reversal helped ensure one of the index's worst weeks of the year, despite another bounce on Friday:

Chart 1: S&P 500 (SPX), 4/18/22–6/17/22. S&P 500 (SPX) price chart. Temporary Fed bump.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)

The headline: Stocks extend slide as Fed takes it up a notch.

The fine print: Longer-term interest rates have also climbed this year as the Fed has embarked on its tightening campaign, but an interesting short-term pivot occurred last week. Treasury yields jumped early last week, but dropped sharply after the Fed’s announcement. The 10-year T-note yield tagged an 11-year high of 3.48% last Tuesday, but ended the week at 3.24%.

The number: 0.75%, the Fed’s biggest rate hike since 1994.

The move: Crude oil prices tumbled more than 8% for the week (more than 6% just on Friday), dragging down energy stocks in the process. The S&P energy sector—the only one that’s up for the year—suffered its biggest weekly loss since March 2020.

The scorecard: The SPX lost more than 5% in back-to-back weeks for just the second time since 2008:

US stock index performance table for week ending 6/17/22. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)

Sector roundup: The strongest S&P 500 sectors last week were consumer staples (-4.4%), health care (-4.5%), and communication services (-4.6%). The weakest sectors were energy (-17.2%), utilities (-9.2%), and materials (-8.3%).

Stock movers: Day One Biopharmaceuticals (DAWN) +126% to $14.96 on Monday, Akero Therapeutics (AKRO) +22% to $10.37 on Thursday. On the downside, Outset Medical (OM) -34% to $13.46 on Tuesday, Ebix (EBIX) -38% to $14.59 on Thursday.

Futures: After hitting an intraday contract high of $120.88/barrel last Tuesday, August WTI crude oil (CLQ2) tumbled to end the week at a three-week low of $107.99. August gold (GCQ2) ended a seesaw week down roughly $35 at $1,840.60/ounce. Biggest up moves: September Russian ruble (R6U2) +6.4%, July VIX (VXN2) +6.2%. Biggest down moves: June ether (METM2) -35.2%, June micro bitcoin (MBTM2) -29.2%.

Coming this week

This week’s numbers include:

Today: Chicago Fed National Activity Index, Existing Home Sales
Thursday: Q1 Current Account, S&P Global Manufacturing PMI Flash, S&P Global Services PMI Flash
Friday: New Home Sales, Michigan Consumer Sentiment Final

Earnings this week include:

Today: La-Z-Boy (LZB), Lennar (LEN)
Wednesday: Winnebago (WGO), KB Home (KBH), Steelcase (SCS)
Thursday: Darden Restaurants (DRI), Accenture (ACN), FedEx (FDX)
Friday: CarMax (KMX)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.


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What to read next...

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Find out about the trading alerts that may have been triggered by the market’s drop to fresh lows.

Two-day sell-off sends market back toward year-to-date lows.

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