Weekly Market Report for February 6-10, 2023
- Markets
- S&P 500 -0.7%
- Dow Jones Industrial Average -0.01%
- NASDAQ -1.32%
- Russell 2000 -2.9%
Domestic equity markets finished the week down. The previous Friday’s payroll increase of 517,000 caused choppiness in the markets this past week. Then hawkish (inclined to raise rates) Fedspeak ensued in response to the high payroll number. Remember, the Fed wants fewer jobs, not more. So, when sustained rate increases reenter the picture stock markets tend to go south. It’s important to note that the Bureau of Labor Statistics (BLS) changed the way it calculates nonfarm payrolls. The BLS revised its methodology, as it does annually, to include an update for population and seasonal factors. Each of the revisions can inorganically boost payrolls numbers, and it did. Another major factor contributing to the week’s declining markets, and it was the Treasury yield curve. The Treasury yield curve inverted to its deepest level since the 1980s. The 10-year bond was yielding 3.6% while the 2-year bond was yielding 4.5%. Why purchase a 10 year investment when a competing 2 year investment offers higher returns? It stands to reason that most would select the shorter product. So when the 10-year U.S. Treasury bond yield is lower than the 2-year, it’s an example of an inverted yield curve. Recently, Treasury bonds have been closing the gap on the inverted curve. This week was one step backwards. Hopefully, the upcoming week’s CPI and PPI inflation data will move the markets two steps forwards.