Stocks fall, bond yields rise as investors get a taste of 2022
Investors got a taste of what higher interest rates can mean for financial markets, including stocks, sectors and bonds.
The S&P fell 1.8% this week, the worst start to a calendar year since 2016, according to the Dow Jones Market Data Group.
The 10-year Treasury yield stood at 1.76%, a 12-month high, as the Federal Reserve revealed that policymakers may step up the pace of interest rate hikes due to the strong inflation.
Steven Mnuchin, former Treasury secretary to President Trump, gave his rate forecast after the December Fed meeting minutes were released on Wednesday.
WHERE INFLATION HITS AMERICANS THE MOST
“It’s clear the Fed is going to raise the rates, the Fed is going to normalize the portfolio. It’s just how fast or how fast they are doing it. In eighteen months we will be sitting with 3% Treasuries at age 10, “Mnuchin told FOX. Business’ Larry Kudlow, who has been Trump’s chief economic adviser.
AMERICAN EMPLOYERS CREATE 199,000 JOBS, UNEMPLOYMENT INCREASES TO 3.9%
December’s jobs report, while mixed, is likely strong enough to keep the Fed on task, economists said. Employers added 199,000 jobs, below the expected 400,000. Yet unemployment fell to 3.9% and the average hourly wage rose 4.7% over a 12-month period.
Higher yields historically benefit banks, which can earn more as a result. Investors therefore took hold of financial stocks, pushing the SPDR Financial exchange-traded fund to a record high on Friday.
|XLF||SPDR SELECT FINANCIAL SECTOR ETF||41.17||+0.48||+ 1.18%|
|BAC||BANK OF AMERICA CORP.||49.18||+1.05||+ 2.18%|
|WFC||WELLS FARGO & CO.||54.77||+1.14||+ 2.13%|
|JPM||JPMORGAN CHASE & CO.||167.16||+1.64||+ 0.99%|
The fastest growing names, including the high-tech Nasdaq Composite, fell 4.5% this week.
|I: COMP||NASDAQ COMPOSITE INDEX||14935.901709||-144.96||-0.96%|
Tech giants including Microsoft fell more than 6% on the week, while Apple and Tesla fell about 3%.
|MSFT||MICROSOFT CORP.||314.04||+0.16||+ 0.05%|
|AAPL||APPLE INC.||172.17||+0.17||+ 0.10%|
New inflation data will be released next week with the release of the consumer price index on Wednesday, followed by producer prices the next day.
Federal Reserve Chairman Jerome Powell will be on Capitol Hill for his re-appointment hearing on Tuesday.
It will likely be toasted by lawmakers over the central bank’s call for inflation and the extremely tight labor market after a record 4.5 million people left their jobs in November in what continues to be dubbed the “great resignation” of the American workforce.