On the One Hand…
On the Other Hand

Weekly Market Update | February 7, 2022

Highlights

U.S. stocks advanced for a second straight week with the S&P 500 finishing the week up 1.6%. The NASDAQ outperformed with a 2.4% jump on the back of strong e-commerce earnings. Returns were also positive overseas with both European and Japanese stocks rising by 2.5%. Importantly, these gains occurred in the face of rising rates with the 10-year U.S. Treasury yield surging nearly 14 basis points to 1.91%.

The January employment report surprised nearly everyone – including the White House – which warned that the report could be ugly. Instead, the employment report easily beat expectations with the U.S. economy adding 467,000 jobs in the month. Monthly job gains in the prior two months were also stronger than previously thought and were revised upward by 709,000 jobs. The report helped to ease fears that the recent surge in Omicron cases would lead to significant economic weakness.

The downside of the employment report is that it supports the view that the economy is strong enough to warrant tighter financial conditions. Following the report, the odds of a 50 basis point rate hike jumped from about 20% to 35% and the odds of more than five rate hikes by year-end climbed to about a one-in-three chance.