Week Ending February 26 Financial Markets Update

The S&P 500 Index declined 2.41% last week with only one sector showing positive performance. Equities were led lower by utilities, consumer discretionary, and information technology sectors. Treasury yields continued their recent rapid ascent resulting in volatility in stocks as reflation policies once again tested the strength in the equity bull market. Federal Reserve Chairman Jerome Powell testified before Congress pledging to continue a supportive monetary policy and downplaying inflation concerns.  U.S. initial jobless claims of 730K were much lower than the consensus estimate of 825K and the previous week’s claims of 861K. Crude oil closed at $61.50 per barrel on Friday, jumping 3.81% for the week helping energy post the best and only positive sector performance.

Treasury yields rose significantly over the course of the week, with the 10-year Treasury yield rising above 1.50% before settling at 1.41%, on optimism of the COVID vaccine, a recovery in the U.S. economy, a massive fiscal stimulus policy and loose monetary policy. These have all led to significant inflation worries and investors are demanding a higher yield. Early in the week Treasury yields rose moderately despite comments from Federal Reserve Chairman Jerome Powell, who said the central bank would “clearly communicate” any change in bond buying well in advance, along with saying that the rising yields were a “statement of confidence on the part of the markets that we will have a robust and ultimate complete recovery.”





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