Weekly Market Recap: Fed Holds Rates Amid Cooling Labor Market

Market Overview:

 The S&P 500 closed higher for the second consecutive week, driven by investors processing outcomes from the FOMC meeting, various earnings reports, and labor market data indicating a cooling trend. April's monthly payroll data revealed nonfarm payrolls expanded by 175K, below economists' expectations and signaling a slowing labor market. Despite this, the unemployment rate rose marginally to 3.9%, and average hourly earnings growth slowed to its lowest pace in three years, indicating a 'Goldilocks' scenario—moderate growth without weakness. Fed officials, including Chicago Fed President Austan Goolsbee, expressed confidence that the economy is not overheating.

Federal Reserve Insights and Economic Roundup:

 As anticipated, the Fed maintained interest rates, citing a lack of progress in combating inflation in recent months. The central bank remains cautious about economic uncertainties and inflation risks, indicating it will not consider rate cuts until it sees sustained progress toward its 2% inflation target. Moreover, the FOMC outlined plans to gradually reduce its holdings of Treasury securities and agency debt, signaling a shift toward balance sheet normalization. Economic data for the week included a decline in job openings, a drop in the quits rate, unchanged weekly jobless claims, a decrease in consumer confidence, and a contraction in manufacturing activity, accompanied by rising prices for manufacturers.

The Week Ahead:

 The upcoming week's economic calendar is relatively subdued, with highlights including wholesale inventories, jobless claims, and the University of Michigan consumer sentiment index. First-quarter earnings season is winding down, with only 56 S&P 500 companies scheduled to report, including Walt Disney. Additionally, investors will monitor speeches from 12 Fed officials and await the latest senior loan officer survey data from the Fed to assess credit conditions in the economy.