According to the news report by Bloomberg, the S&P 500 continued its rally by gaining 3.5% this week. In fact, the report stated that it was difficult to find fault with the stock market’s resilience this week.
This week saw a lot of reasons for the stock market to tank. There were trade tensions thanks to the new steel and aluminum tariffs. The jobs report for the previous month had been released. However, the S&P 500 weathered all these storms and gained 3.5% by the end of the week.
Volatility in the stock market is rapidly going down and tech stocks are once again ruling the roost.
While the week may have started with menacing news, things improved over the next few days. The jobs data showed a jump in hiring, but without the previous reports’ increase in salaries and wages, alleviating concerns about another round of inflation and interest rate hikes.
Additionally, President Trump backed off a little on the steel and aluminum tariffs, saying that he was willing to compromise on the previously blanket tariffs that he had announced.
And finally, a summit between President Trump and Kim Jung Un that is being planned has helped created optimism about seeing a diplomatic breakthrough in the Korean Peninsula, a region that has been plagued by tension thanks to North Korea’s aggressive stance.
The director of equities at Wedbush Securities Inc., Ian Winer said that there had recently been a feeling that markets had been lost, however, now, investors were regaining confidence. The news that the economy is not overheating as was feared in the last two months is a welcome reprieve for the market.
The week started with massive fears that Trump’s new tariffs would be the beginning of a trade war, with the US alienating its allies. However, by Thursday, Trump had signed an order that had significant carve-outs for America’s allies.
The tension caused by the threatened tariff imposition did have a positive effect on domestic small cap markets. The Russell 2000, the Index for small cap companies, went up by 4%. Even the Dow Jones Industrial Average went up by 3.3% this week.
When the jobs report was released on Friday, it gave even more confidence to investors that the Federal Bank was not behind on inflation. 300,000 people were hired while wage growth fell below market expectations. When this news broke, all the main indices in the US rose by a minimum of 1.6%.
The CBOE Volatility Index, that tracks fear in the market, fell to the lowest it has been since February 1. That was the day before the markets began their down slide.
More good news is that the S&P 500 broke through its 50-day moving average for the first time in a month.
Considering that so much has happened this week, the market is going to watch next week’s inflation data very carefully. The market consensus estimate for inflation is a 2.2% year to date increase from January, which had a 2.1% inflation rate.
Inflation data is especially important as the bonds and treasuries yields have been inching up in the last few weeks. The chief investment officer of Penn Mutual Asset Management made a point that if the bonds yields reach a 3% level, then even if the economy is healthy, it will be very difficult for equities to maintain an upward momentum.
CEO of PNC Investments Rich Guerrini, in a telephonic interview with Bloomberg, said that February has been a tough month, however the markets showed a lot of resilience and that a good pace is still being maintained.