Wall Street closed positive and recorded the first week with gains in a month

Stocks headed for their best day in at least a month on Friday and rebounded after several weeks of declines. He S&P500 it rose 1.6% and had its first winning week in the last four. It has regained some stability after the rapid ups and downs of the start of the year.

The industry average Dow Jones increased by 1.2%, while Nasdaq 2 percent advanced composite.

The main indicator for the markets lately has been the direction of inflation and what the Federal Reserve is going to do about it. “I would like to talk about other things, but all that matters is the Federal Reserve and the trajectory of the inflationsaid Amanda Agati, Chief Investment Officer at PNC Asset Management.

Earlier in the year, Wall Street rallied on hopes that lower inflation would lead the Federal Reserve to moderate their interest rate hikes. These climbs can reduce inflation slowing the economy, but also increasing the risk of a after the recession and hurt investment prices.

Last month, the recovery reversed after several reports on the economy turned out to be more bullish than expected. They included data on the labor market, consumer spending, and inflation itself at multiple levels.

The strength of the data raised fears that inflation could continue to be pushed higher. This forced Wall Street to drop hopes for rate cuts this year and to raise their expectations as to the evolution of rates.

More data emerged Friday showing the economy is in better shape than previously thought: last month, growth in the services sector was slightly above economists’ expectations. This bodes well for the economy and helps ease worries about an impending recession, especially when the manufacturing sector is struggling. But it could also increase the pressure on inflation.

Rather than sending stocks lower and yields higher, as stronger-than-expected data did for much of the past month, markets reacted in the opposite direction.

The performance of the 10-year Treasury bond it fell back to 3.96% from 4.06% on Thursday. This is a respite from last month’s rally as expectations of a tougher Federal Reserve rose. The two-year yield, which is moving more in line with Fed action expectations, also fell slightly.

Beneath the surface of the report was potentially encouraging data for inflation. Prices paid by service organizations continue to rise, but growth slowed in February.

“We started the year with a rising market delusional, disturbs or even disturbs that it made no sense,” Agati said. “That illusion is clearly still in the background, although we are beginning to understand some of that reality.”

In your opinion, the Federal Reserve will have to raise interest rates even more than the market expects due to stubborn inflation. With corporate earnings falling and another dip expected due to a mild to moderate recession, he believes the stock market will eventually fall before stagnating for a while and gradually rising, reminiscent of a bathtub shape. .

“It will be a longer cure cycle,” says Agati. “Investors are so used to high volatility and breakneck speed that they want everything to happen immediately. The market is trying to fix the price all at once. It will take longer for the Federal Reserve to stop take the reins.

The Federal Reserve’s next interest rate decision is scheduled for the end of this month. Prior to that, reports of labor market strength and inflation are likely to have a large impact on the market and on expectations for what the Federal Reserve will do.

Last month, the Federal Reserve scaled back the scale of its rate hikes and highlighted progress in tackling inflation. He also suggested there could be two more rate hikes. But strong data since then has raised fears that the Federal Reserve could not only raise rates by at least three times as much, but also reduce the magnitude of the hikes.

(With AP information)

Continue reading: