Stocks increased on Friday as Treasury yields declined from recent highs, investors considered the overall effect of the Fed’s rate hikes already in place, and they took in this week’s remarks from the central bank.
To reach 33,390.97, the Dow Jones Industrial Average increased by 387.40 points, or 1.17%. The S&P 500
reached 4,045.64 up 1.61%, and the Nasdaq Composite closed at 11,689.01 up 1.97%.
The yield on the standard 10-year Treasury note fell under the 4% mark. Traders have been keeping an eye on 4% as the critical threshold on the 10-year that could start another stock market decline. Stocks have occasionally declined this week when the 10-year rate has risen over that level.
A breakthrough in the 10-year Treasury yield might have an impact on the economy because it is a benchmark rate that affects mortgages and auto loans.
According to Yung-Yu Ma, chief investment strategist at BMO Wealth Management, “the stock market is quite sensitive to bond yields at this moment and seeking for some reprieve from the recent upward swings in yields. After the troubling results from last month, there is apprehensive anticipation for the impending data releases on employment and inflation. Before data indicators start cooling again, the market is unlikely to gain momentum.
The major averages all recorded a profitable week. With its 1.75 percent increase, the Dow ended a four-week losing streak. The S&P 500 ended the week up 1.90%, marking its first week of gains in the previous four. The Nasdaq increased by 2.58% at the week’s end.
As Atlanta Fed President Raphael Bostic stated that he believes the central bank can limit interest rate increases to 25 basis points rather than the half-point increase that some other officials prefer, the market’s attitude improved on Thursday.
But, in his remarks to the Mid-Size Bank Coalition of America, Fed Governor Christopher J. Waller adopted a more confrontational tone, highlighting the potential of a higher terminal rate if inflation numbers don’t decline. He made mention of the most recent readings of the consumer price index and personal consumption expenditures reports, as well as the significant payrolls data from January, which showed the economy generated 517,000 jobs.
The policy goal range will need to be raised even further this year if those data reports keep coming in at an excessively high rate make sure that the momentum we had before the January numbers were disclosed does not wane,” Waller added.
Correction: The weekly increase for the Nasdaq Composite was misstated in an earlier version of this article.
Source (CNBC)
