Markets Rocket on Friday; Stocks and Bonds Gain for the Week

Good morning, and welcome to the first full week of 2023.

Thanks to a huge spike on Friday, the Dow (+1.5%), NASDAQ (+1.0%), and S&P 500 (+1.5%) started the first week of the year in positive territory.  Similarly, bonds rallied with taxable bonds gaining almost 2% and tax-free municipal bonds gaining over 1%. 

While it was a great way to start the year, I’m usually concerned when the rallies come as a result of bad economic news, albeit there was a mixture of news on Friday.  In short, the markets are continuing to behave in a manner that “hopes” the economic data will be bad so that the Fed will ease back on raising interest rates. 

The manufacturing PMI data was released on Friday, and showed that the US and the world are below 50, indicating the economies are in contraction.  That was enough to send the stock and bond markets rocketing on Friday, even in spite of good jobs data, which has recently caused the markets to go down.  There was also a report from Macy’s over the weekend that warned of lower earnings from the prior quarter.  That should be concerning for earnings data, as we are about to enter corporate earnings season in a week or so.  Let’s see how that goes.

 

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