After investors were washed in volatility the past few months, it was time for stocks to rally after a positive jobs report and a more accommodative central bank boosted equities. In the meantime, Treasury yields rose, putting downward pressure on government bond prices on Friday.
The Direxion Daily S&P500 Bull 3X ETF (NYSEArca: SPXL) rose 10 percent on the strength of the Dow Jones Industrial Average gaining over 700 points, while the Direxion Daily 20+ Yr Trsy Bull 3X ETF (NYSEArca: TMF) fell 3 percent. A flight to the safe-haven confines of Treasury debt has been a persistent trend the last few months, but the positive jobs growth data and Powell’s comments provided the boost for stocks.
The Federal Reserve didn’t show much dynamism in 2018 with respect to monetary policy, obstinately sticking with a rate-hiking measure with four increases in the federal funds rate. That appears to have changed given the current economic landscape, and especially in the capital markets as Fed Chair Jerome Powell is now preaching patience and adaptability.
“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.”
Meanwhile, job growth surged to 312,000 during the month of December, handily beating economists’ expectations of 176,000 nonfarm payrolls added. In the bond market, Treasury yields rose across the board with short and long duration notes ticking higher.
The data caps off what’s been a rough start for the capital markets in 2019 amid global growth concerns. However, the latest employment data could help allay fears of a global economic slowdown.
“The economy has been slowing, but someone forgot to tell the labor markets,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors. “Employers, it would seem, didn’t get the memo from Mr. Market that it’s time to tighten their belts.”
For more market trends, visit ETF Trends.