Week Ending August 6 Financial Markets Update

The S&P 500 index once again closed at an all-time high last week. A strong US job report helped fuel equity returns as non-Farm Payrolls for July came in at 943k besting expectations and last months was revised up 88k to 938k. Unemployment fell to 5.4% down from 5.9% last month, while hourly earnings surprised to the upside. All this shows the strength of the U.S. recovery from the COVID recession. The Delta variant continues to concern the equity markets but hasn’t prevented equities from reaching new all-time highs.

Treasury bond yields increased last week. Longer dated maturities led the selloff in treasury bonds, resulting in the steepening of the yield curve. Much of the selloff in treasury bonds took place after Friday’s better than expected jobs report. The blowout in the jobs report can be attributed to people returning to work as state governments pare back excess unemployment benefits. Last week a couple of Federal Reserve officials voiced their opinions on monetary policy and the economy’s road to recovery. Dallas Federal Reserve President Robert Kaplan mentioned the central bank should start tapering sooner rather than later, while Federal Reserve Vice Chair Richard Clarida believes the domestic economy is on the right trajectory for the central bank to start raising interest rates by 2023.

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