The 2nd quarter fumbled out of the gate with losses in four out of the five major markets. The more heavily concentrated Dow Jones Industrial Average especially felt the brunt of the losses last week with a drop of 2.27%. 

The week began with selling which seemed to become more pronounced each day the market closed lower. Wednesday served as a midweek respite to the selling before it resumed with greater fervor Thursday and recovered slightly Friday. 

The week ended with the release of the March BLS Employment Report. The headline number blew past estimates on the street with a reading of 303,000 jobs added. This was over 100,000 more than anticipated. That said, when looking at the numbers below the headlines, we see that the number of people working part-time jobs increased by 691,000 while the number of people working fulltime jobs actually dropped by 6,000. This employment characteristic seemingly belied the headline number, giving the markets positive news, yet a fair amount of caution as well. 

The employment numbers have continued to be surprisingly resilient despite the elevated interest rate environment. The other economic indicators earlier in the week also came in generally positive which makes cutting interest rates a bit of a challenge for the Federal Reserve as they do not want to take action too early and risk additional inflationary risk

Minneapolis Fed President Neal Kashkari, a non-voting Fed member, went so far as to verbalize this saying  

“If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all,” 

This hawkishness around the rate cuts was a blow to market participants who came into this year anticipating multiple rate cuts. The CME Group Fed Watch tool still has priced in multiple rate cuts this year with the most likely cut projected to take place in June. 

Treasuries saw the yield curve rise in response. The long-term end of the yield curve rose the greatest as the 20 and 30-year duration added 20 basis points. 

This action in turn hit the bond markets which saw widespread red. As a result, the Bloomberg Barclays Aggregate Bond Index gave back over a percentage point. 

https://www.reuters.com/markets/us/feds-kashkari-says-2024-rate-cuts-under-threat-if-inflation-continues-stall-2024-04-04/

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