Markets Lower to Close Out Wild Month of Trading…..

U.S. equities finished out a volatile month of May lower in a holiday-shortened week, as volatility returned following last week’s solid performance. Persistent inflation that has caused the Fed to turn toward a highly hawkish monetary policy recently has fostered concerns about a slowdown in economic activity and the possibility of falling into a recession. Investors also eyed a scheduled meeting between Fed Chairman Jerome Powell and President Biden today to discuss inflation and the economy. Meanwhile, the European Union announced a ban on Russian crude oil imports as a result of the ongoing war in Ukraine. In economic news, consumer confidence dipped, home prices increased more than expected, the Chicago Purchasing Managers Index surprisingly jumped, and Dallas manufacturing activity fell into contraction territory. Treasuries were lower, pushing yields higher across the curve, and the U.S. dollar nudged to the upside, while crude oil prices declined, and gold also lost ground. Europe finished mostly lower, and markets in Asia were mixed.

The Dow Jones Industrial Average declined 223 points (0.7%) to 32,990, the S&P 500 Index lost 26 points (0.6%) to 4,132, and the Nasdaq Composite fell 50 points (0.4%) to 12,081. In heavy volume, 6.6 billion shares of NYSE-listed stocks were traded, and 5.8 billion shares changed hands on the Nasdaq. WTI crude oil moved $0.40 lower to $114.67 per barrel. Elsewhere, the gold spot price was down $15.30 to $1,8421.00 per ounce, and the Dollar Index gained 0.1% to 101.74. Markets were mixed for the month of May, as the DJIA and the S&P 500 were nearly unchanged, while the Nasdaq Composite decreased 2.1%.

Consumer confidence dips but less than expected…..

The Conference Board’s Consumer Confidence Index decreased to 106.4 in May from April’s upwardly-revised 108.6 level, and versus the Bloomberg estimate calling for a reading of 103.6. The overall index was hampered by the Expectations Index of business conditions for the next six months portion of the index, which decreased to 77.5 from April’s upwardly-revised 79.0 level, while the Present Situation Index portion of the survey declined to 149.6 from the previous month’s positively-revised 152.9 level. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—decreased to 39.3 from the 44.7 level posted in April.

The Chicago PMI surprisingly jumped and remained comfortably in expansion territory (a reading above 50). The index increased to 60.3 in May from April’s 56.4 reading, and versus estimates calling for a dip to 55.0. The better-than-expected report came as growth in new orders and production accelerated, and employment decelerated. Prices paid also accelerated to keep inflation pressures extremely elevated, but supplier deliveries rose at a slower pace to suggest supply chain challenges may begin to ease.

The Dallas Fed Manufacturing Index surprisingly fell and dropped into contraction territory (a reading below zero) for May. The index dropped to -7.3 from 1.1 in April, and compared to the Bloomberg consensus estimate calling for a rise to 1.5. The decline came even as growth in shipments and production output accelerated, while new orders decelerated, along with growth in employment. Inflation pressures were steady but remain severely elevated.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 21.17% year-over-year (y/y) gain in home prices in March, above the Bloomberg consensus estimate of a 20.00% rise. Compared to the prior month, home prices were up 2.42% on a seasonally adjusted basis, compared to forecasts of a 1.90% gain.

Treasuries were lower, and yields have been choppy as of late as markets anticipate tighter Fed monetary policy amid the backdrop of persistent inflation and signs of slowing economic growth.

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