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Weekly Market Review: Fed Hikes Rates by Most in 28 Years

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Our weekly review of the market. The broader U.S. market averages were mixed on Friday, but the S&P 500 still experienced its largest weekly loss in nearly two years. Our Stock of the Week is a Transporation name.

The broader U.S. market averages were mixed on Friday, but the S&P 500 still experienced its largest weekly loss in nearly two years.

Energy and Utility names led the way lower last week and volatility was heightened by quarterly options expiration.

On Wednesday, the FOMC increased short-term interest rates by 75 basis points, which marked its largest upward action since 1994.

Stocks briefly rallied in reaction to the rate hike on Wednesday, although Fed funds futures suggest another 200 basis points of increases are possible by the end of the year. 

The Federal Reserve is boosting interest rates in an attempt to combat rising inflationary pressures. It was reported on Tuesday that core U.S. producer prices (PPI) jumped 8.3% in May, excluding food and energy.

In other economic news, core U.S. retail sales growth fell short of expectations in May, excluding autos.

The Week Ahead

U.S. markets will be closed on Monday, for a holiday. When trading resumes, it will be a relatively quiet earnings calendar for the week, with Accenture (ACN) being one of the notable companies that will report earnings.

On the economic front, Fed Chair Jerome Powell will be testifying on Capitol Hill Wednesday and Thursday.

Thursday morning also brings the preliminary June readings of the purchasing managers’ index (PMI), giving insight into the state of the manufacturing and services sectors.

After the close of trading on Thursday, the Federal Reserve will release the results from its annual stress test of more than 30 top financial institutions.

Given a slowing growth outlook and the prospect of higher interest rates, it could become hard to come by investment gains in 2022. As a result, deciding what and when to buy can be challenging for any investor.

However, the fact remains that investments with upside potential and other positive signals are out there if you dig a little deeper.

One such Transportation name is worth a closer look and is our Stock of the Week.

Stock of the Week: FedEx (FDX)

FedEx transports packages and freight across 220 countries and territories.

The stock gained 11% amongst the selling last week. It is showing signs that it has the potential to continue this relative outperformance into the second half of 2022. Here’s why:

FedEx increased its quarterly dividend by 53% on Tuesday, to $1.15 a share (2% yield). Investors at the close of trading on June 23 will qualify for the payment on July 11.

Management also said that it came to an agreement with activist investor D.E. Shaw and that the company will add three new members to its board of directors.

At current levels, the stock is valued at just 10.1x expected earnings over the next four quarters, which is a discount to the broader market and the 14.1% annual profit growth that FedEx is expected to generate for the next three to five years.

Wall Street agrees that the company holds value. The average price target of 12 active analysts tracked by TipRanks is $289, which represents 25.7% upside potential.

In the meantime, the company carries an “Outperform” Smart Score of 9 out of 10 on TipRanks. This data-driven stock score is based on eight key market factors.

On top of the positive aspects mentioned already, the Smart Score indicates that shares have seen insider buying, in addition to improving sentiment from financial bloggers.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio, a weekly newsletter that blends big data, and market insights.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >

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