Soaring Stocks: Breaking Down Last Week’s Market Rip

Rising Stocks

Stocks rallied last week, and the S&P 500 logged its best weekly performance of the year so far. Here’s what has the market to hot.

As so often, it was more than just one thing. The Federal Reserve kept interest rates on hold as expected, labor productivity sprinkled in some optimism on the inflation front, and strong earnings added to the excitement.

Market Moves

It’s been a hot yield autumn so far, and stocks have been at the mercy of the U.S. Treasury market. As yields on U.S. government securities rose, stocks felt pressure.

But last week, the 10-year Treasury yield declined, dropping from 5% to 4.5%, allowing stocks to breathe a sigh of relief. In response, the S&P 500 registered a 5.9% gain last week — the biggest since November last year.

Out of the Woods?

Last week’s stats might have you giddy, but are stocks out of the woods?

The Federal Reserve might indeed be done raising rates for the time being, at least if you ask market participants. But even if that holds true for the central bank’s December policy meeting, rates will likely be higher for longer, which isn’t great news for stocks. Cutting rates would likely stoke a rally, but we seem to be a ways away from that.

However, if economic data takes a turn, this picture could change, and the market could conclude that the Fed’s policy has gone too far, and needs to course-correct.

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