I will keep this post short and sweet as usual. My favorite benchmark S&P 500 posted its worst weekly performance of the year and only its fourth overall negative week of 2024. The decline was primarily driven by strong economic data on the labor market, which increased bets that the Federal Reserve would be in no hurry to cut interest rates.
Additionally, a rally in commodities led to a resurgence in inflation fears, while a jump in Treasury yields also put pressure on equities. Friday’s nonfarm payrolls report blew past expectations, with the economy adding 303,000 jobs, the unemployment rate ticking down, and the labor force participation rate inching up.
The US two-year yield approached the high for the year (4.75%), and the 10-year yield set a new high 4.43%. The bond market seems to have accepted that rates cuts will be slower to come and the economy stronger for longer. Elsewhere, the US dollar closed softer against most of the G10 currencies.
Looking ahead, attention will be on key events such as the release of US inflation data, meetings of the European Central Bank (ECB) and the Bank of Canada. The tail end of the week includes the first flurry of major earnings reports, with JPMorgan Chase, Wells Fargo, BlackRock, and Citigroup all due to spill numbers. Everyone loves earnings season.
Will there be any surprises that could rock the markets especially for those who believe that we are not out of the woods yet on inflation? Well, when it comes to hedging, you could do anything as long as it makes sense. Uncle Bob still recommends hiding in the cave.