Stocks Finish Week Strong; Treasury Yields hit 4%

Buoyed by strong gains on Thursday and Friday, the Dow (+1.9%), NASDAQ (+2.6%), and S&P 500 (+2.0%) finished the weekand started the month of March on a favorable note.  This was a rebound from a roughly 3% loss the prior week and snapped a 3-week string of losses in stocks. Meanwhile, taxable bonds gained about 0.2%, but tax-free municipal bonds lost about 0.2% for the week.   

Last week, we continued to exhibit strong economic data, as durable goods orders, manufacturing, and services reported values that indicated the economy maintains its resiliency, even in the face of rising interest rates.  Concerns about further interest rate hikes caused the 10-year Treasury yield to hit the 4% milestone on Thursday, before dropping below it again on Friday. 

Diversified investors can expect to receive account statements that showed a drop of about 2% for the month of February.  I actually find that to be surprisingly tame.  February marked one of the sharpest monthly rises in the 10-Year Treasury yield during this cycle that started in early 2022, as we also eclipsed the 4% mark again.  The biggest surprise is that the interest rate sensitive growth stocks actually performed better than their value counterparts during the month.  Looking under the hood, it also appears that there has been an appetite for high-growth and more speculative stocks that also exhibit below average earnings.  That is contrary to what one would expect in this rising interest rate environment and increasing chances of a recession.  All eyes will be on the February jobs report that will be released on Friday, as a strong report will give the Fed more reason to continue its aggressive rate hiking campaign.

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