Yields on government bonds plunged on Friday, as reports suggested that the sought-after soft landing for the economy may be a possibility.
Why it matters: A soft landing — meaning inflation eases, without the economy falling into a recession — would allow the Fed to ease up on the interest rate hikes that crushed the stock and bond markets last year.
State of play: Yields on the 10-year Treasury note plunged after a near-ideal jobs report Friday morning was followed by a closely watched ISM survey release on the services sector that showed a surprise slowdown.
- Context: Until recently, persistent strength in the services sector was seen by analysts as a reason that the Fed might have to keep hiking interest rates sharply.
- Falling yields, in turn, perked up the stock market which notched its best day so far this year. The S&P 500 rose 2.3%, driving the index to a tidy gain of 1.5% for the week.
What we’re watching: The big inflation update that arrives on Thursday in the form of the Consumer Price Index. If that shows a third straight slowdown, Wall Street will be a happier place.