Markets “In a Nutshell” for May 8, 2023
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 1.20%, the S&P 500 was down 0.8%, and the NASDAQ rose 0.10%. Foreign stocks (MSCI EAFE) were down, falling 0.6%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 3.43%. (Data source: Wall Street Journal)
Fed Raises Rates
The Federal Reserve raised rates once again by 0.25% as expected by the market. This makes it 10 meetings in a row that the Fed has raised rates bringing the fed funds rate to 5.0%-5.25%. The Fed also changed its language when talking about future rate hikes as it seems that this could be the final rate hike in this cycle. However, Fed Chair Powell did push back against possible rate cuts in the short term as he stated inflation was well above their 2% target and they need to see more progress before cutting rates. Despite Powell saying this, markets are still pricing in rate cuts as early as the September meeting and are seeing 3 rate cuts by the end of the year, 0.25% each. Powell also spoke on the banking system and said that despite the few bank failures that the US banking system is “sound and resilient” and conditions have improved since early March.
Labor Market Continues to be Strong
Despite rates rising and worries of a recession looming over the economy and market, employment has remained strong as the US economy added 253,000 jobs in April. Estimates were 185,000 for April so this was a surprise to the upside as unemployment is now 3.4% which is near all-time lows. The report did revise the February and March numbers lower, bringing the 3 months average to 222,000 jobs gained a month. Wage growth also remained elevated at 4.4%, well above the 3.5% goal from the Fed. Employment data tends to lag the overall economy as we could still see unemployment rise toward the Fed’s expected unemployment rate of 4.6% this cycle. Although higher unemployment is never good for the economy, it would help lower inflation as the consumer would not be able to spend as much if the job market begins to tighten and bring wage growth down.
How many insured commercial banks were there in the USA at the end of 2022? (Scroll Down for Answer)
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2. 4,135. According to the FDIC there were 4,135 insured banks in the United States. This number has been slowly decreasing since the 1920’s when there were over 28,000 banks. Many expect this trend to continue as the bigger banks continue to acquire small, regional banks.