Stocks and Bonds Solidly Lower Despite Strong Economic Data

The Dow (-2.3%), NASDAQ (-0.8%) and S&P 500 (-0.9%) each lost ground for the week.  Similarly, taxable bonds and tax-free municipal bonds fell about 1.1% and 0.7%, respectively.  The 10-year Treasury yield rose 0.19% to finish the week at 4.39%, serving as the catalyst for bonds to lose value.

Several economic reports came in strong last week that have demonstrated the strength and resilience of the US economy.  The Institute of Supply Management (ISM) Manufacturing report moved into expansion territory again for the first time since September 2022, and the ISM Services report also showed continued expansion.  Lastly, the March jobs data reported on Friday showed 303,000 were added last month, compared to the 200,000 expected.

So, if the economic data was strong, then why did the stock and bond markets fall?  Investors have been hoping for the Fed to cut interest rates, and the stronger than expected economic data raises concerns that inflation could become an issue again.  Thus, not only didn’t the Fed cut rates in March as previously predicted, but the chance of the Fed cutting rates in June is also becoming less likely.  In fact, there was some buzz going around that the Fed may even consider raising rates again, and that would almost certainly have a negative impact on stocks and bonds.  Additional pressure is also being placed on inflation, as energy (oil) prices have been rising due to elevated risks of conflict in the Middle East.  Important inflation data will be reported this week and will likely be the source of market volatility, especially if the data is significantly different than what is expected by economists and investors.

For those of you carving out the time to watch the solar eclipse today, we hope that the skies are clear.  Be careful about looking into the sun, though, as that can be rather harmful to your eyes.  Have a great day and terrific week!

^{Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.}

^{The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.}