Last Friday was a key trading day for the stock market as fears of interest rates rising too quickly and by more than expected over the short term started to diminish.
In what is widely seen as the primary headwinds to the bull trend, both rising inflation and increasing interest rates have been the current culprits for the volatility that has the Dow gyrating by hundreds of points on a daily basis these past two weeks. At the same time, the CBOE Volatility Index (VIX) has declined substantially from its reaction high of 50.30 set on Feb. 9 when the S&P 500 tested its 200-day moving average at 2,533 and closed at 16.49 last Friday, down 11.91% for the session.
The sudden shift in investor sentiment that led a charge back into stocks at the end of last week was a direct result of the lifting of fear of a 3.0%+ yield for the 10-year Treasury. Soft data on existing homes and retail sales, along with a healthy bond auction, put a much-needed bid under the 10-year T-Note, taking the yield back down to 2.87% from the recent high of 2.94%. As a result, investor attention immediately shifted to the ever-brightening earnings picture for the S&P 500 to set off a green-light rally that was broadly represented by most sectors.
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