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The Federal Reserve did not take the punch bowl away on Wednesday, but it did remind everyone at the party that there is a closing time. And it is likely to be sooner than expected. The Fed brought forward its previous view that the first rate hike in the expected eventual tightening cycle would come in 2024. It has now indicated that it may come in 2023, and there may be more than one quarter point rate hike before the end of 2023. That message was followed up on Friday by St. Louis Fed president Bullard, who said somewhat ominously that the Fed has been surprised at the severity of rising inflationary pressures, although the Federal Open Market Committee (FOMC) re-asserted its view that such pressures are transitory, and that the first rate hike could come as soon as late 2022. 

Despite a growing chorus of concern over rising inflationary pressure, stocks climbed to a new closing high last week. The S&P 500^® index rose 0.4 percent, its third straight week of gains, to close at 4247, leaving it higher on the year by 13.1 percent. And the complexion of the market leadership looked quite different from the recent past. Healthcare and Real Estate led the way higher at the sector level and were joined by Technology and Consumer Discretionary. Trailing behind, and all with losses on the week, were Financials, Materials and Industrials. 

U.S. equities rallied on Friday following the May jobs report, falling just shy of a closing record high. The S&P 500^® index climbed 0.9 percent on the day to end the week at 4229.89. That left the index fractionally short of its May 7th closing high of 4232.60. It was the growth sectors of the index that led the way higher, rallying strongly after bond yields fell on what was perceived as a benign pace of job growth for those concerned about rising inflationary pressure.