The S&P 500 Index returned 0.79% last week, posting its first positive week of 2022. The index is down 6.93% YTD after four weeks of trading. Equities have been under pressure as investors focus on inflation, supply chain issues, Fed decisions on tapering and timing of rate increases, the economic effects of Covid-19 restrictions and the increasing Ukraine and Russian border tension. On Wednesday, markets appeared to have positively digested the FOMC statement. However, equities declined sharply in the afternoon giving back early gains after Federal Reserve Chairman Powell’s press conference comments gave a more hawkish stance than what was interpreted from the earlier statement.
The Fed left interest rates unchanged last Wednesday, as expected, but signaled it will raise interest rates and end its asset purchases in March as it starts to move away from the highly accommodative monetary policy it put in place during the pandemic. The moves come in response to high inflation, which continued to show up in data released last week. The Employment Cost Index showed wages and benefits paid by employers grew 4% last year, its highest increase since 2001. Meanwhile, the Personal Consumption Expenditures Price Index, a measure of prices paid for goods and services in the U.S., increased 5.8% from the prior year, which was its highest increase since 1982.