On Friday, U.S. stocks increased as the 10-year Treasury yield retreated below 4%.
The Dow Jones Industrial Average increased by 0.2%, or 77 points. The Nasdaq Composite increased by 0.5%, while the S&P 500 increased by 0.4%.
These actions coincide with a decline in U.S. Treasury yields, with the benchmark 10-year yield falling below the crucial 4% threshold and the 2-year rate dropping to 4.855%. The 2-year bond reached heights on Thursday that hadn’t been reached since 2007.
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.
The main averages are headed for a profitable week. The S&P 500 ended the week up 0.28% on Thursday, on track to end a three-week loss, while the Nasdaq gained 0.6%. Moreover, the Dow rose 0.6% for the week.
The Dow had its best day since February 13 on Thursday, finishing 1.1% higher. The Nasdaq Composite and S&P 500 both increased by 0.8%.
grew by 0.7%. These advances followed Raphael Bostic, president of the Atlanta Fed, saying that he believed the central bank might raise interest rates by 25 basis points, as opposed to the half-point increase that some other officials preferred.
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 expanded this year in order to prevent losing the momentum that existed before to the release of the January statistics, according to Waller, if those data reports keep coming in too hot.
Despite the messages the central bank is sending the public, the path ahead remains difficult.
Peter Boockvar, chief investment officer at Bleakley, stated in a note that “there is no escaping the pitfalls of reversing exceptional easing, no matter how slow the Fed goes, no matter how much they ‘communicate’ what they plan to do.
“There will never be a recovery when markets and the economy have been dependent and drugged for so long on low rates and QE the appropriate moment to relax,” he remarked.