The S&P 500 continues to tear higher, up 10% since the October low. For the week, US stocks advanced by 2.60%, international stocks by 3.52%, and bonds by 1.37%. The yield on the 10-year treasury fell by 13 basis points to 4.44%.
Investors figure that inflation is sinking, interest rates have dropped, and Fed cuts are coming. The CME Fed-Watch site says the market is pricing in four 25-basis point cuts by the end of next year. That seems contrary to the “higher for longer” theme that Fed officials preach.
Equities had a monster rally worldwide; US markets jumped by 6.05% and international stocks by 5.78%. Bonds rallied by 2.02% as the 10-year yield fell by 27 basis points. Markets rallied when the Treasury announced that long-term debt auctions would be smaller than anticipated. In addition, economic data came in softer than expected. Interest rates dropped like a rock in response.
During the week, the Fed announced they would hold interest rates steady. Investors are assuming that interest rates are near their peak. Also, job growth was only +150,000 in October, half of the September gain. All of this news combined set up a “Goldilocks” scenario, at least that is the way the market reacted.