April 8, 2024
Good morning,
Following another stunningly strong employment report on Friday morning, stocks rallied to recover most of the losses they had suffered earlier in the week, while bonds continued to fall (higher yields). On the week, the S&P 500 Index fell only -0.95%, the U.S. Treasury 10-yr yield rose 20 basis points from 4.20% to 4.40% (in technical terms, that’s a lot). It was an up and down week for stocks where bulls liked the continued strength of the economy but were not happy about the diminishing rate cut expectations that were echoing from several Federal Reserve regional presidents. Markets are now pricing in a 50% chance of two rate cuts by year-end.
It is a decent data week ahead: there is CPI Wednesday, PPI Thursday (Consumer and Producer Price Indexes) and earnings season kick-off Friday with several big banks reporting. I think the rise in equity market volatility will stay with us this week, and I hope (hope is not a strategy) bonds settle down because eventually, stocks will notice these new higher yield levels and it may not be a good reaction.
Be well,
Mike
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