The major stock market averages moved higher on Friday heading into the weekend, ending the week with solid gains: The Dow Jones Industrial Average rose 1.8% to 33,391 (breaking its 4-week losing streak) – the Standard & Poor’s 500 Index gained 1.9% to 4,046 (snapping a 3-week losing streak) – while the NASDAQ Composite added 2.6% to 11,689. These gains came primarily after the yield on the benchmark 10-year Treasury note dipped back below the psychological 4% level.
Earlier in the week stocks pulled back after yields on the 10-year rose above that 4% level – which is being widely watched by investors and consumers – as it influences mortgage and other loan rates. The concern is higher rates will slow the economy and hurt corporate earnings. Hence, when yields pulled back from their highs, the stock market breathed a sigh of relief and rallied. Also helping along these lines, were comments from Atlanta Fed President Bostac, indicating he believed the central bank could keep their interest rates hikes to ¼ point, rather than the ½ point predicting by many.
During the week ahead, financial markets will be intently focused on the February Jobs Report due out on Friday. Expectations are the economy added 205,000 jobs last month, while the unemployment rate held steady at 3.4%. The Federal Reserve watches the jobs number and unemployment rate closely, as stronger reports give them more “room” to raise rates, while a weakening labor market may indicate the Fed can be less tight with monetary policy.
Last month’s jobs report came in much hotter-than-expected, worrying investors interest rates would have to go higher, and stay there for longer. The market would welcome a goldilocks jobs report this time around, which is neither too hot and potentially inflationary, nor too cold and indicating the economy is starting to roll over. As a reminder, we believe in long term investing. Both stock and bond prices are currently sensitive to and trading off each new batch of inflation/economic data and all the “Fed-speak” around interest rates – we don’t advise trying to time or outguess any of these numbers or commentary. Rather, we recommend having a long-term investing view and horizon, while having a financial plan and asset allocation that is right specifically for you!
As always, please call us with any questions or if you would like to set up a meeting.
All the best – Southport Station Financial Management, LLC