Week of April 4, 2022
The U.S. equity markets ended the first quarter on a very volatile note last Thursday with the Dow losing more than 550 points. On Friday, the Labor Department announced that the economy has added 431,000 new jobs and/or returned to work in March, while estimates from Dow Jones called for 490,000. This lowered the unemployment rate to 3.6%. Although March’s unemployment rate missed estimates, the Dow and S&P 500 gained 140 and 15 points, respectively, while the NASDAQ gained 41 points.
For the month of March, the S&P 500 gained 5.2% with the utility sector outperforming with an 11% gain. The S&P 500 did lose 5.6% for the first quarter, making this the worst quarter for the index since 2020.
“Strong gains on the employment front continue to signal a green light for investors despite multi-decade highs in inflation and concerns over higher rates and Fed tightening,” noted Peter Essele, head of portfolio management at Commonwealth Financial Network. “The economy appears to be in exit mode, with the only concern being the amount of labor supply available to fuel the robust recovery,” he added.
Last Saturday, New York Federal Reserve president, John Williams, said that in addition to raising interest rates again at its May meeting, the Fed may begin reducing its balance sheet to address the level of U.S. inflation that have become “particularly acute.”
The Federal Open Market Committee (FOMC) will publish the minutes from the central bank’s March meeting, giving investors a better understanding into how the Fed views market conditions and where the economy stands after another strong showing for the jobs market.
The yield curve, graphing Treasury yields from 3 months to 30 years, has been flattening and even inverting temporarily in recent weeks. “Yield curve inversions have historically predicted recessions with long and uncertain lags, while hopes over cease-fire have ebbed and flowed,” UBS said in a note.