Market-Moving News: February 5, 2018

   Ripple effect

The major stock indexes tumbled around 4%, posting their biggest weekly declines in more than two years. The Dow sank nearly 1,100 points, dropping below the 26,000-point level that it had breached just a couple weeks earlier. A sharp rise in bond yields weighed on equities as investors adjusted to expectations of rising inflation and tighter monetary policy.

 

   Bond sell-off

Bond prices dropped, sending yields higher. The yield of the 10-year U.S. Treasury climbed to 2.85% on Friday—the highest level in more than four years, and up from 2.40% at the close of 2017. January marked the biggest monthly jump in the 10-year note’s yield since November 2016.

 

   Wage impact

One factor that weighed on bond prices on Friday was January’s sharp increase in wages, which climbed at the fastest pace since 2009. That gain helped fuel concerns that a tightening labor market could spur inflation. Friday’s jobs report also showed steady employment growth in January, with 200,000 jobs added; unemployment was unchanged at 4.1%.

 

Total returns as of 2/2/18

 

Map of the market

U.S. equity size and style total returns (%) as of 2/2/18

 

The week ahead

FEBRUARY 5–9

MONDAY: Institute for Supply Management’s nonmanufacturing index

TUESDAY: Job Openings and Labor Turnover Survey, U.S. Bureau of Labor Statistics; trade balance, U.S. Census Bureau

WEDNESDAY: Consumer credit, U.S. Federal Reserve

THURSDAY: No major reports scheduled

FRIDAY: Wholesale inventories, U.S. Census Bureau