U.S. stocks rebounded during the week after a sharp Monday selloff. Early last Monday, the Russell 2000 Index of small-cap stocks was down 10% from its closing high on March 15, marking its first correction in more than a year.
Most major U.S. stock indices closed out the quarter at or near record highs, following a tech-powered growth spurt in June. Investors have been rotating back into many of the favorite tech names that rose during the pandemic as inflation fears are easing, valuations are less rich, and low bond yields have folks hunting for higher returns.
The Fed rattled markets with surprisingly hawkish comments after their June policy meeting last week, talking about earlier-than-expected rate hikes. Large caps held up better than small caps, and growth stocks outpaced value names thanks to sell-off in energy and financial names.
Falling treasury yields helped boost growth stocks last week, pushing the S&P 500 Index to a record closing high. While headline inflation rose 5% year-over-year in May, the fastest pace since 2008, with a 3.8% rise in core CPI (excluding food and energy), the Fed remained dismissive of the data attributing it to temporary factors that will soon abate.