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With better than expected jobless claims this week, market participants were concerned about its impact on pushing up inflation and witnessing quicker rate hikes. A combination of these sentiments prompted the first major sell-off in the markets early this week.
The rising treasury yields prompted the Dow to fall around 1,500 points intraday on Monday, but the market soon recovered, then stabilized as the week progressed. The weekly jobless claims figure declined 9,000 to 221,000 last week, and once again short-term worries sent investors into a tizzy.
While the short-term effects of a strong labor market might have concerned investors, it is certainly good for the overall economy in the long run. After all, there is a possibility that the labor market will cool off in the coming months, which was further supported by the declining JOLTS job openings figure in December.
To conclude, market participants seemed to be spooked due to worries about rising government bond yields and potential rate hikes, but so far, the Q4 earnings season has delivered nothing but good news for investors. Moreover, overall economic data remained positive in the long run so we shouldn’t panic over this week’s extreme volatility, at least from a fundamental perspective.
Be sure to check out our previous week’s edition here, in which investors focused on the rising Treasury yield and the start of the recent bearishness in the equity markets.