Equity Markets End Week Lower as Yields Rise

Equity Markets End Week Lower as Yields Rise

Equity markets ended last week lower after House lawmakers approved a budget bill, pushing long-dated Treasury yields higher. Negative sentiment also emerged around the prospects of a U.S.-China tariff truce. Global equities, as represented by the MSCI All Country World Index, finished the week down 1.35%, while domestic stocks, represented by the S&P 500 Index, fell over 2.5%. This broke the recent streak of weekly gains, as the S&P 500 continues to fluctuate between positive and negative year-to-date returns.

Treasury Yields Rise

As previously noted, Treasury yields rose last week, with the 10-year exceeding 4.5% and the 30-year climbing past 5%, approaching their highest levels since 2007. This reaction from the bond market came after the House approved the budget bill, potentially signaling that the market is beginning to pay attention to the current debt path and fiscal discipline, as well as recalibrating expectations for fewer Fed rate cuts this year.

Existing Home Sales Decline

U.S. sales of existing homes unexpectedly declined in April, hindered by high mortgage rates and rising home prices. Despite the typical spring uptick in homebuying, the National Association of Realtors reported a 0.5% drop in sales from the previous month—the slowest pace for April since 2009. Meanwhile, the U.S. dollar fell to its lowest level in four weeks on Friday against a basket of major currencies, though it remained above the three-year low reached on April 21. Year to date, the dollar was down nearly 9% as of Friday.

Looking Ahead

A report set to be released on Friday may help reduce recent uncertainty surrounding the path of inflation. The Personal Consumption Expenditures (PCE) Price Index, which the U.S. Federal Reserve uses as its preferred measure of inflation, showed prices increasing at an annual rate of 2.3% in March, down from 2.7% in February.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.