Weekly Wrap: Staying the Course - Week Ending May 3

Market Movers  

• No hikes ahead? Although the Federal Reserve acknowledged a "lack of further progress" on inflation thus far, Fed Chair Jerome Powell pushed back on the possibility of further rate hikes at this week’s meeting. Powell suggested the bar to hike this year is high and expressed confidence that the current policy is restrictive. His dovish message, coupled with signs of a cooling US labor market, moved rate expectations from one cut to two this year. Two-year US Treasury yields fell 17 basis points to 4.8% over the week.
  
  
• High earners. This week saw another robust slate of earnings, with 20% of the S&P 500 market cap reporting Q1 earnings. The S&P was up 0.5% on the week, as investors paid close attention to weaker consumer spending, AI investments, and forward-looking estimates.
  
  

Macro

• Stepping in. After the yen fell to a 34-year low of 160.7 on Monday, the currency ultimately rebounded, following what economists believe was intervention from the Bank of Japan. While Japan’s Vice Minister of Finance for International Affairs, Masato Kanda, declined to comment on intervention, money market data suggests the ministry spent nearly $60 billion this week to support the yen. Strategists believe the support may have limited impact and is unlikely to reverse the USD/JPY rate, which is more influenced by broader macroeconomic fundamentals.
  
  
• Cool down. After a strong start to the year, reports show US manufacturing slowed as employers scaled back hiring. The Institute for Supply Management’s manufacturing purchasing managers index fell to 49.2% in April, down from March’s 50.3% (a reading below 50% indicates contraction). Meanwhile, non-farm payrolls only grew 175K in April (vs. 240K expectations), the unemployment rate increased to 3.9%, and wage gains came in lower than expected.