Stocks Fall to End a Bad Week, and a Boom Begins to Look Shaky
- 6 years ago
Stocks Fall to End a Bad Week, and a Boom Begins to Look Shaky
The immediate catalyst was the jobs report, which showed the strong United States economy might finally be translating
into rising wages for American workers — a sign that higher inflation could be around the corner.
Given the strength of the global economy, central banks, led by the United States Federal Reserve, have started to remove some of the supports
that helped supercharge stock and bond prices over the last decade.
Interest rates that are set every day in the global bond markets are already leaping
higher, in anticipation of central bank rate increases later this year.
On Friday, the yield on the 10-year Treasury note — a widely used gauge for overall
interest rates — rose to more than 2.8 percent, the highest level since early 2014.
Average hourly earnings for United States workers were 2.9 percent higher in January than the previous year, the fastest annual increase in years.
But what is really worrying investors is that the fuel behind this stock market boom,
namely cheap money from global central banks, may disappear sooner than they thought.
Their goal was to incentivize investors to put their cash to work in the economy — for example, by buying corporate stocks
and bonds — rather than stashing it in the relative safety of government bonds.
The immediate catalyst was the jobs report, which showed the strong United States economy might finally be translating
into rising wages for American workers — a sign that higher inflation could be around the corner.
Given the strength of the global economy, central banks, led by the United States Federal Reserve, have started to remove some of the supports
that helped supercharge stock and bond prices over the last decade.
Interest rates that are set every day in the global bond markets are already leaping
higher, in anticipation of central bank rate increases later this year.
On Friday, the yield on the 10-year Treasury note — a widely used gauge for overall
interest rates — rose to more than 2.8 percent, the highest level since early 2014.
Average hourly earnings for United States workers were 2.9 percent higher in January than the previous year, the fastest annual increase in years.
But what is really worrying investors is that the fuel behind this stock market boom,
namely cheap money from global central banks, may disappear sooner than they thought.
Their goal was to incentivize investors to put their cash to work in the economy — for example, by buying corporate stocks
and bonds — rather than stashing it in the relative safety of government bonds.