The strong rallies in stocks unfortunately did not sustain their momentum by the end of the week, as all major stock indices took a hit. The market displayed the opposite theme from last year and showed that “good news is bad news” today when the employment report was released, showing that many more jobs were added to the economy than expected while the unemployment rate remained unchanged. The strength in the economy surprised many analysts, and investors are now concerned about a potential rate hike in 2026, considering that strong job growth is generally associated with higher inflation.
The market rotated out of growth stocks and focused on defensive sectors. The Dow slipped just over 1% to 50,867 because of its more defensive composition. The Nasdaq experienced a sharp selloff and ended the day more than 4% lower at 25,709. The S&P 500 also lost more than 2.5% of its value, ending at 7,384. The weekly returns on all indices were not meaningfully better. The AI investment theme, as the biggest growth story, took the biggest hit, with the technology sector losing more than 5% and consumer discretionary, where Amazon is included, losing nearly 5% by the end of the week.
The Treasury market sold off as higher rates and inflation were the focus today. The 5-year yield surged 12.5 basis points to 4.27%, and the 10-year yield rose 8 basis points to 4.54% compared with last Friday. Gold also declined below the 4,400 mark.
This week showed us a very strong U.S. economy, even though the situation with Iran has not appeared to improve. Nevertheless, the strength was sufficient for investors to believe that the Federal Reserve may pivot away from its maximum-employment mandate and toward lowering inflation.
Adams Wealth Advisors wishes you an enjoyable weekend, and we will continue to provide insights next week.