With the 10 year Treasury yield hitting 3% in April during a steady increase in interest rates to start 2018, we believe taking a look at several common misconceptions investors have with fixed income would be helpful.
Trade war fears with China reared their head again to drive a weekly decline in US stocks. The S&P 500 fell 1.4% and the Dow eased 0.7% for the week. Internationally, Europe gained 1.1% and Japan was up 0.5% for the week. The yield on the 10 year Treasury bond edged up to finish the week at 2.78%. Article
The Trump administration announced another $50 billion in tariffs on Chinese goods that could be assessed unless an agreement is worked out between the two countries. The 25% tariffs include medicines, medical equipment dishwashers, machine tools and chemicals.
US employers hired 103,000 people in March well below the 178,000 expected. The unemployment rate was expected to drop to 4.0%, but held at 4.1% for the sixth straight month. Wage gains increased 2.7% in March. Revisions from January and February reduced the number of hires by 50,000. Article
President Trump threated China with an additional $100 billion in tariffs.
Fed Chairmen Powell said the Fed will stick to its gradual approach to raising interest rates as long as the economy stays on its current path.
Stocks rallied over the week, rebounding partially from the prior week’s significant declines, but posted the first down quarter in two and a half years. The S&P 500 and the Dow gained 2.4% for the week. Internationally, Europe rose 1.4% and Japan surged 4.1% for the week. The yield on the 10 Year Treasury ended the week at 2.74%, its lowest level of the month and down from 2.87% at the start of March. Article
Consumer spending rose a meager 0.2% in February as Americans saved more.
Stocks fell over the week as protectionist trade policies weighed. The S&P 500 dropped 1.2% and the Dow fell 1.5% for the week. Internationally, Japan gained 1.0% and Europe ticked down 0.1% for the week. The yield on the 10 year Treasury bond eased to end the week at 2.85%. Article
Inflation eased in February rising 0.2% with core inflation posting the same increase. Over the trailing year the CPI rose 2.2% with core prices up 1.8%. The slower pace reduced concerns the Fed would move faster to raise interest rates. Article
US retail sales declined 0.1% in February despite strong employment and improving wage growth surprising economists.
The Trump administration blocked Broadcom’s $117 billion hostile takeover bid of Qualcomm on grounds that it’s a national security concern.
Toys “R” Us announced it would sell or close all of its US stores.
Theranos CEO Elizabeth Holmes agreed to settle with the SEC after being charged with fraud alleging that the company deceived investors about the capabilities of the company’s technology.
Stocks surged over the week on reduced fears over a global trade war as well as a strong jobs report. The S&P 500 soared 3.5% and the Dow rose 3.3% for the week. Abroad, Japan climbed 1.4% and Europe jumped 3.1% for the week. The yield on the 10 year Treasury ended the week at 2.89%, up slightly over the past week. Article
US employers hired 313,000 workers in February the largest monthly gain since July 2016. Over 800,000 people joined the workforce and the unemployment rate remained at 4.1%. Wage growth eased from the prior month rising 2.6% and January wage growth was revised down as well reducing investors’ concerns on inflation and the speed at which the Fed may act. Article
Tariffs were approved on steel and aluminum, but Trump suggested that a number of countries could be spared and has excluded Canada and Mexico to start. Article
Trump’s top economic advisor Gary Cohn announced he was resigning after the president had announced plans to implement tariffs on steel and aluminum. Cohn had been a chief voice of opposition to the plan.
Mortgage rates reached their highest level since 2014 with the 30 year fixed mortgage rate reaching 4.46%. It is up from 3.95% to start the year.
AXA said it was buying insurer XL group for $15.3 billion.
Cigna agreed to buy Express Scripts for $52 billion.