The tug-of-war between stocks and rising bond yields could set the tone for the coming week, particularly if positive economic data continues to push Treasury yields higher.
Friday’s February employment report is the highlight of the week’s data and an important current look at the impact of the virus on the economy, after just 49,000 jobs were added in January. For February, economist expect to see 218,000 jobs added, and the unemployment rate should stay the same at 6.3%, according to Dow Jones.
Fed speakers are also a major focus of the markets, after the rapid rise in bond yields this past week had the feel of a runaway train. Fed Chairman Jerome Powell is the most important speaker, when he appears at a Wall Street Journal summit Thursday.
“If he wants to stop this rise in rates, he does have to say something. But he risks sounding hawkish. The more dovish he sounds, the higher rates will go,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. When the Fed is described as dovish, it means it is maintaining easy policy, such as keeping interest rates at low levels.
The rapid runup in interest rates this month caught investors by surprise. The benchmark 10-year yield, which influences mortgages and other loans, was at 1.46% Friday afternoon, about 15 basis points [0.15%] above the level it was at just a week earlier. After a big surge Thursday, the 10-year yield traded on both sides of 1.50%, which is the consensus view of where yields would be at the end of the year, not the beginning.
The expected economic boost from stimulus has also been driving yields higher, and it has also heightened concerns about inflation.
Other data in the week ahead includes ISM manufacturing data Monday and Thursday’s jobless claims, important after an unexpected decline in the past week’s data.
Reference: CNBC
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