Stocks Closed Modestly Lower Yesterday After Soaring Last Week  Image: Bigstock Stocks closed modestly lower yesterday. Not surprised we'd see a little bit of profit taking after last week's spectacular rally which saw the Dow up 5.39%, the S&P up 6.45%, and the Nasdaq up 7.49%. The decline that we've seen this year, especially over the previous few weeks and months seemed way overdone. Inflation concerns are very real. And so is the increase in rates. With inflation being the biggest threat to the economy right now, the Fed has finally decided to front load rate hikes to try and arrest inflation sooner rather than later.
While the market cheered the news as it relates to inflation, traders fretted over the possibility of higher rates slowing the economy down to the point where it sends us into a recession. Q1 GDP was down -1.5%. So a negative print for Q2 would technically put us there. Fortunately, the latest GDP Now forecast by the Federal Reserve Bank of Atlanta increased their Q2 estimate to 0.30%. That's not much on an upward revision. But given it's 0.00% estimate last week, it's a step in the right direction. And looking further out, the Fed is forecasting full-year GDP to come in at 1.7% this year, and another 1.7% next year. So while the economy did slow in the first half, it's looking like the second half will be much stronger. And after the market priced in the worst-case scenario, it might very well have to reprice the market higher to reflect economic growth rather than recession. What we saw last week could be the start of that. Let's see if that can continue this week. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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