Equity markets were choppy last week but ended generally in positive territory. The S&P 500 returned 0.84% for the week as there was a rotation from higher valuation names towards lower valuation names. Equites ground down to start the week on news of growing 10-year treasury yields, which increases discount rates and tends to push higher valuation names lower because much of their expected cash flows are further in the future. Higher yields was a driver behind the S&P 500 Growth Index returning -1.15% last week, while the S&P 500 Value Index returned 3%. Democrats appeared to reach a deal on passing a $1.9t stimulus package which sent stocks higher and closed the week mostly positive. Looking ahead to next week, eyes will continue to be on Congress and the odds of them passing the $1.9t stimulus package. While this is likely to fuel short term returns in equities, it remains to be seen how much it will fuel longer term inflation concerns.
U.S. Treasury bond yields increased across the yield curve last week, with larger gains at the long end of the curve. Last week the 10-year treasury bond yield hit its highest intraday level in a year as the bond selloff continued. In a speech on Thursday, Federal Reserve Chairman Jerome Powell largely stuck to the script and remained dovish on bond yields but mentioned bond yields have caught his eye. Treasury yields spiked in response to the Chairman’s comments. Investors digested a batch of positive jobs data at the end of the week as the labor market continues to recover. Nonfarm payrolls increased 379,000 in February, which was 179,000 higher than the expectation. The large increase in nonfarm payrolls was due to a surge in the leisure and hospitality sector. Unemployment dropped to 6.2%, a 0.1% drop from January. Average hourly earnings rose 0.2% last month as well.
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