Stocks Rally Despite Surge in Interest Rates

Good morning,

The Dow (+0.3%), NASDAQ (+2.1%), S&P 500 (+1.2%), and EAFE (+0.2%) all finished higher for the week, led by strong gains in technology stocks. Meanwhile, taxable bonds and tax-free municipal bonds were both down sharply, losing 0.8% and 1.8%, respectively. The 10-year Treasury yield increased 0.15% to finish the week at 5.16%, its highest level in more than 20 years.

Interest rates were once again the primary focus for investors, as stronger-than-expected manufacturing data and a continued strong labor market pushed bond yields higher. Initial jobless claims fell to 197,000, remaining near historically low levels. While that is positive for the economy, it also gives the Fed more flexibility to raise interest rates again as it continues to focus on inflation.

Despite the rise in interest rates, stocks remained resilient, with the NASDAQ reaching a new record high during the week. Oil prices also declined to roughly $92 per barrel as tensions in the Middle East appeared to ease, which could help reduce some inflationary pressure.

This week, investors will focus on Wednesday's PCE inflation report, followed by manufacturing data on Thursday and Friday's labor report. Those reports will likely help shape expectations for the Fed's October meeting.

Have a great day and terrific week!

^{Source:  Yahoo Finance}

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^{The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.}