By Rick Schwerd | April 5, 2024
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Labor Market Continues to Hum
The labor market surprised again, adding 303,000 jobs during March, approximately 100,000 more than expected. The unemployment rate dropped .1 percent to 3.8 percent. Average Hourly Earnings dropped .2 percent to 4.1 percent, a positive from an inflation perspective.
Stocks had a rough week as spiking oil prices increased inflation concerns. West Texas Crude surpassed $87 a barrel for the first time since last October. Geopolitical concerns regarding the Middle East also weighed on markets. A bit of a pullback would not be surprising given the strong run the markets have had over the last six months.
Strong First Quarter for Stocks
The S&P 500 closed out the first quarter at an all-time high of 5,253, rising by 10.5 percent. Artificial intelligence (AI) darling Nvidia continued to lead the way, returning a whopping 83 percent during the first three months of the year. Unlike last year when much of the returns were generated by a small group of mega-cap stocks, this year’s rally has been much broader. Along with information technology, industrials, financials, energy and communication services all returned 11 percent or more during the quarter.
The tech-heavy NASDAQ rose 9.3 percent during the quarter, a solid showing following its 53.8 percent gain in 2023. The more value-oriented Dow Jones Industrial Average rose 6.1 percent during the first three months of the year. The small-cap Russell 2000 continues to lag, rising 5.2 percent during the quarter.
Bonds Lag as Yields Rise
Bonds have struggled out of the gate this year. The benchmark Bloomberg Bond Aggregate Index lost .78 percent during the first quarter, following last year’s 5.5 percent gain. Given the inverse relationship between bond prices and yields, intermediate and long-term bond yields have steadily increased so far this year. The benchmark 10-Year U.S. Treasury, which was at 3.88 percent to start 2024, now sits at 4.33 percent.
The reason for the increase in yields is mostly twofold. The economy continues to perform better than expected in the face of tight monetary policy, and recent inflation data has been disappointing. These factors have caused markets to reassess their predictions about the direction the Federal Reserve will take going forward. Markets began the year with six quarter-point rate cuts priced in for 2024. It is now predicting three.
Looking Ahead
Today’s labor market report is the start of a busy news cycle for markets. Next week, the crucial Consumer Price Index (CPI) and Producer Price Index (PPI) data arrives. Additionally, Friday marks the unofficial start of first-quarter earnings season, when major financial firms such as JP Morgan begin to report earnings.
As always, if you have any questions or concerns regarding markets or your financial planning needs, please reach out to us at (518) 415-4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a Senior Investment Officer at Glens Falls National Bank. He oversees individual and corporate retirement plans, personal trusts, investment management accounts, foundations and not-for-profit relationships. He is also co-portfolio manager of the proprietary North Country Large Cap Equity Fund.