Markets End the Week With Volatile Session as Both Treasurys and Equities Rise

Equities rise on high volume, ending the best week for US stocks in more than three months. The S&P 500 closed up 0.50% while the Dow Jones Industrial Average and Nasdaq Composite closed up 0.54% and 0.76% respectively. Volume was well above normal, many pointing to the “quadruple witching” of options and futures expiration and a large index rebalance as the leading culprits for the market action. The rally came despite the continued impasse with Congress as President Trump vetoed a Senate bill that would have blocked the emergency funding he is trying to arrange for the build out of a border wall.

Treasurys rally after manufacturing and industrial production data comes in weaker than expected. Treasury yields fell 3-4 basis points across the curve, with swap rates following suit. Industrial production only grew 0.1% month over month in February versus a projected 0.4% increase, and NY Fed’s survey of general business conditions fell to a reading of 3.7, well off predictions for a level of 10.0. The 10 year Treasury yield ended the day at 2.589% (down 4 basis points on the day) nearing its 12 month low yield of 2.554%.

Week ahead. The highlight for market-watchers next week will be the FOMC meeting that begins on Tuesday and ends Wednesday. The FOMC will make a rate decision at 2:00 PM ET on Wednesday, followed by Fed Chair Jerome Powell’s press conference. No rate hike or cut is expected, but there could still be a significant market reaction to the FOMC’s updated forecasts or Jerome Powell’s comments.