Market Pulse

In focus

After a tumultuous 2022, January concluded last week with both stocks and bonds up big. The S&P 500 was up over 6% on the month, while bonds were up over 3% as well, the best January for the U.S. Aggregate benchmark since 1988. The first week of February continued some of those trends, but also saw wild swings given the economic developments.

The Federal Reserve (Fed) decided last week to again slow the pace of hikes, opting to raise their benchmark rate by just 0.25% after the 0.5% raise in December. That brings the cumulative increase in rates to 4.5%, the largest one-year increase in the Fed funds rate since 1981. Markets interpreted the press conference as dovish, however, since Fed Chair Powell didn’t push back against the loosening financial conditions as hard as some had expected.

On Friday, the latest U.S. jobs report was released and showed that the labor market is in a much better position than many had expected. The unemployment rate also dropped to the lowest level since 1969 at 3.4%. Bonds took this news the hardest with yields rising and prices falling as traders took some bets on Fed cuts off the table as the U.S. economy proves to be more resilient. On the other hand, stocks hung in better after the report, bucking the good news is bad news trend and finishing the week up over 1.6%.  

A look back

• U.S. stocks led last week with the S&P 500 up 1.6% while international developed markets lagged, and emerging markets fell. 
• U.S. Treasury yields rose last week, mostly stemming from the blowout jobs report. The 2-/10-year curve inverted further, down to -77 basis points now.
• The Fed raised their benchmark rate again but slowed the pace, opting only for a 0.25% rate hike. 

A look ahead

• Earnings season continues with 91 companies reporting this week. Tech remains in focus and discretionary names will begin to take the stage as well.
• The Fed will try to frame its latest step down in rate hikes with nine speakers this week, including Chair Jerome Powell.
• Economic releases: Trade Balance, MBA Mortgage Applications, Wholesale Inventories, U. of Michigan Sentiment.

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