Blog Post

Tug of War Between Interest Rates and Economic Outlook

Stocks indices ended a volatile week mixed.  A strong economic outlook pushed up bond yields which raised concerns about stock valuations.  The markets whipsawed with selloffs countered by buy on the dip rallies. 

Jerome Powell’s comments on Thursday, assuring the FED would maintain easy money, did not calm the stock and bond markets as he avoided saying the FED would take action to reduce longer term interest rates.  Longer term interest rates rose with the 30 year mortgage breaking above 3%. 

OPEC+ agreed to extend their current production cuts through the end of April, further boosting crude oil prices.

Treasury yields rose with the 30-year bond yield closing at 2.229% and the 10-Year note closing at 1.568%.  Crude oil rose to $66.28 a barrel while natural gas fell to $2.734 per MMBTUs.  The U.S. dollar index rose to 91.98 and gold fell to $1698.20 an ounce. 

In the economic numbers this week: 

  • IHS Markit reported purchasing managers indices for February:
    • US manufacturing PMI fell from 59.2 in January to 58.6 in February.
    • US services PMI rose from 58.3 in January to 59.8 in February.
    • China manufacturing PMI fell from 51.5 in January to 50.9 in February.
    • China services PMI fell from 52.0 in January to 51.5 in February.
    • Eurozone manufacturing PMI rose from 54.8 in January to 57.9 in February.
    • Eurozone composite PMI rose from 47.8 in January to 48.8 in February.
    • Japan manufacturing rose from 49.8 in January to 51.4 in February.
    • Japan services rose from 46.1 in January to 46.3 in February.
  • The Commerce Department reported that the trade deficit rose 1.9% in January from December.  Both imports and exports grew but imports are much larger portion of trade.  Consumer goods drove the rise in imports while industrial supplies and capital goods drove the increase in exports.
  • The Labor Department reported: 
    • A seasonally adjusted 745,000 workers filed initial claims for unemployment in the week ending February 13th.  This was an increase of 9,000 from a revised 736,000 the week before.
    • The 4-week moving average, designed to smooth out volatility, was 790,750, a decrease of 16,750 from the previous week’s revised average.
    • Continuing claims fell from a revised 4.4MM to 4.3MM in the week ending February 20th.
    • A broader measure of claims including extended benefits, pandemic assistance and other programs fell from 19.0MM to 18.0MM the week ending February 13th.
    • For the full unemployment report go here: .
    • The U.S. added a net 379,000 jobs in February.  However, total employment is about 10MM below last February.
  • The EIA weekly oil report is here: .  Also, the EIA reported in the prior week:
    • Field production of crude oil fell from 9.7MM barrels per day to 10.0MM BPD.
    • Natural gas storage fell 98BN cubic feet and is below the average level at this time of year during the past five years.
    • Baker Hughes reported the number of active oil rigs rose14 to 310.  The number of active natural gas rigs was unchanged at 92.

Best Regards,

Loren C. Rex, CFP®, MA                                                          Erik A Smith AIF®

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Generations Financial Planning & Wealth Management        269-441-4143

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Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor.  Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated. 

These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.  The Indices mentioned are unmanaged and cannot be invested into directly.


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