Markets “In a Nutshell” for February 6, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average fell 0.20%, the S&P 500 was up 1.60%, and the NASDAQ rose 3.30%. Foreign stocks (MSCI EAFE) were also up, rising 1.20%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 3.52%. (Data source: Wall Street Journal)
Fed Raises Rates
Once again, the Federal Reserve has raised rates, this time a smaller rate hike at 0.25%. Although this rate hike was once again expected, the market made a move higher as Fed Chair Powell spoke as investors see a possible pause in hikes in the near future. The biggest moves higher came in growth stocks once again as they tend to benefit the most when interest rates slow down and move lower. This is shown as the NASDAQ is up over 14% in just this year compared to the Dow Jones which has fewer growth stocks, which is only up 2%. Higher interest rates tend to curb growth as borrowing money gets more expensive. The most applicable example for most Americans is mortgage rates and having a higher monthly payment when buying a new house. This is the same case for companies borrowing money to grow their businesses no matter how big.
January Jobs Report
Although many are fearful of a possible recession, the labor market continues to be one of the strongest in history. The economy added 517,000 jobs last month pushing unemployment lower to 3.4%, the lowest since 1969. The only time we have seen lower is post WWII in 1951-1953. This would suggest that the economy is still strong as the Fed has raised rates but not caused too many layoffs. Although some companies have announced layoffs, it tends to be more focused on tech companies that overhired during the Pandemic as their businesses were booming. Another positive in the jobs report was that wage growth slowed to 4.4% which may not sound like a positive but could cause the Fed to pause rate hikes sooner as that has a direct impact on inflation. As wage growth slows companies do not have the need to increase prices as quickly as labor tends to be the biggest cost for most companies.
How many jobs openings are there currently in the United States? (Scroll Down for Answer)
Have a Great Week!
1) 11 million. Job openings increased despite adding over half a million jobs in January. This continues to support the strong labor market as companies still are looking for workers and there continues to be more openings than unemployed people.