Stocks rose on Friday as Treasury rates fell from recent highs as investors considered the cumulative effect of previous Fed hikes and absorbed the central bank’s statements this week.
The Dow Jones Industrial Average gained 387.40 points, or 1.17%, to close at 33,390.97. The S&P 500 rose 1.61% to 4,045.64, while the Nasdaq Composite rose 1.97% to 11,689.01.
The yield on the benchmark 10-year Treasury note fell below the 4% barrier. Traders have been keeping an eye on 4% as the critical 10-year threshold that might precipitate another stock market decline. As the 10-year rate surged over that level this week, equities fell.
Since the 10-year Treasury yield is a standard rate that affects mortgages and car loans, a change in it could affect the whole economy.
“The stock market is very sensitive to bond yields at this point and looking for some respite from the recent upward moves in yields,” said Yung-Yu Ma, BMO Wealth Management’s chief investment strategist. “There’s a nervous anticipation for upcoming data releases for jobs and inflation after the difficult readings last month. The market is unlikely to have sustained traction until data points resume a cooling trend.”
All of the main averages had a profitable week. The Dow gained 1.75%, snapping a four-week losing trend. The S&P 500 finished the week up 1.90%, marking its first positive week in four. The Nasdaq finished the week up 2.58%.
Raphael Bostic, president of the Atlanta Fed, said Thursday that the central bank might only raise interest rates by 25 basis points instead of the half-point rise that some other officials want. This made the markets feel better.
But, in remarks to the Mid-Size Bank Coalition of America, Fed Governor Christopher J. Waller took a harder tone, suggesting the prospect of a higher terminal rate if inflation rates do not fall. He cited January’s large payrolls report, which showed the economy generated 517,000 jobs, as well as the most recent consumer price index and personal consumption expenditures readings.
“If those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the January data were released,” Waller said.