A bad economy leads to good stock market performance.
Stocks rallied strongly over the week on signs of a slowdown in growth and inflation, lifting the S&P 500 out of the bear market territory. Aside from energy, all sectors in the index recorded strong gains. As a result of monetary tightening by the Fed, the US economy and inflation slowed and moderated. A half-point decline in U.S. home sales in May, a drop in the S&P Global index of manufacturing activity in June that was well below estimates (52.4 versus 56), and a decline in the University of Michigan's consumer sentiment in June that was the lowest measurable level in nearly forty years. Federal Reserve Chair Powell testified before Congress on Wednesday and Thursday that inflation expectations appeared to be anchored. Due to his comments and the weaker-than-expected economic readings, the yield on the benchmark 10-year Treasury note briefly dipped below 3.0%, a large decrease from last week's peak of almost 3.5%. European shares stopped falling for the third week in a row as signs of slowing economies raised doubts about whether central banks would increase interest rates aggressively. China's stock markets advanced in hopes that President Xi Jinping would release more stimulus measures to support the economy and minimize the effects of COVID-19.
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