Market Ends Week Down Despite Generally Positive News

This past week, the Bureau of Labor Statistics released its jobs report. Major news involved the biggest year-over-year increase in wages since the recession, a 10-year Treasury-note yields jump, roughly 200,000 jobs being added in January alone, and the Dow Jones Industrial Average dropping over 600 points.

• Wages increased year over year at 2.9%, which is the best pace since June 2009. According to the Wall Street Journal, the largest increases were among senior management, whereas production workers and non-supervisors, making up roughly 82% of the private-sector, only rose 2.4% on the year. The 200,000 non-farm jobs created in January continued the 88th straight month of job creation.   The growth demonstrates the durability of America's economic trajectory since 2009 despite sluggish wage growth over the years. The overall unemployment rate continued to sit at its current 17-year low of 4.1%. 
• Various analysts and investors believe that the Federal Reserve will raise short-term interest rates at its next meeting in March. Federal Reserve of Minneapolis President Neel Kashkari admitted that continued wage strength could affect interest rate formulation. Considering the recent tax reform projected cuts, increasing wage growth, and other positive economic factors, it is believed that the Fed will increase interest rates more than they had initially planned.
• Ten-year Treasury notes have experienced a 0.852% yield increase since September. The sharp increase in the yield curve may be credited to selling activity from investors, which may have spilled over to equity markets last week. The Dow Jones Industrial Average closed down 665.75 points, or 2.5%, on Friday, and volume of trading increased to 13.5% more than the average of the previous ten days.

 
The sharp decline in the stock market is a good reminder that the stock market is not the economy. The stock market may decline while economic numbers are positive and vice versa.  Despite the stock market volatility, many analysts believe 2018 will see continued economic growth via strong consumer and business confidence, stronger global economic trends, and increased spending and investment from recent corporate tax cuts.