U.S. equities rose Friday as the 10-year Treasury yield dipped back below 4%.
The Dow Jones Industrial Average rose 138 points, or 0.3%. The S&P 500 climbed 0.5% and the Nasdaq Composite gained 0.6%.
Those moves come as U.S. Treasury yields retreated, with the yield on benchmark 10-year Treasury note dipping below the key 4% level and the 2-year rate falling to 4.855%. During Thursday’s trading session the 2-year climbed to levels not seen since 2007.
Traders have been watching 4% as the key level on the 10-year that could trigger another down move in stocks. At times this week when the 10-year rate rose above that point, stocks retreated. The 10-year Treasury is a benchmark rate that influences mortgages and car loans so a breakout in the yield could ripple through the economy.
The major averages are on their way to a positive week. On Thursday the S&P 500 closed up 0.28% on the week, on pace to snap a three-week decline, while the Nasdaq had a 0.6% gain. The Dow was also up 0.6% on the week.
However, Fed Governor Christopher J. Waller struck a tougher tone in his comments to the Mid-Size Bank Coalition of America, raising the possibility of a higher terminal rate if inflation numbers don’t cool.
He referred to January’s big payrolls report, which showed the economy added 517,000 jobs, as well as the latest reading from the consumer price index and personal consumption expenditures reports.
“If those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released,” Waller said.
The road ahead is a tough one for the central bank, regardless of the messaging they’re relaying to the public.
“No matter how slow the Fed goes, no matter how much they ‘communicate’ what they want to do, there is no avoiding the potholes of reversing extraordinary easing,” Bleakley chief investment officer Peter Boockvar wrote in a note.
“When markets and the economy have been addicted and medicated for so long on low rates and QE, there will never be the right time to ease up,” he said.
Comments