The week got off to a good start...

In testimony before House and Senate committees, Federal Reserve (Fed) Chair Jerome Powell noted that prices had been falling and unemployment rates remained quite low. As a result, he expected the Fed to begin lowering the federal funds rate in 2024.

"I think we're in the right place," he said. "We're waiting to become more confident that inflation is moving sustainably at two percent. When we do get that confidence—and we're not far from it—it'll be appropriate to begin to dial back the level of restriction so that we don't drive the economy into recession rather than normalizing policy as the economy gets back to normal."

After Powell's comments, the likelihood of a June rate cut rose, and so did U.S. stock indices. The bond market rallied, too, with yields across all maturities of U.S. Treasuries dropping lower through Thursday.

On Friday, a mixed bag of employment data arrived. It showed that:

• Hiring was stronger than expected in February. Employers added 275,000 new jobs over the month – 75,000 more than expected – although gains in December and January were revised lower.
• Wage growth was slower than expected, rising 4.3 percent year-over-year in February when economists had predicted a 4.5 percent annual increase, according to Meghan Leonhardt of Barron's.
• The unemployment rate rose, increasing from 3.7 percent to 3.9 percent. (The unemployment rate is derived from a separate and smaller survey of households.)

The data suggested that the labor market was strong but cooling, and bolstered hopes that a soft landing might be ahead. While that was positive news, it was overshadowed by weakness in technology stocks. Sarah Hansen of Morningstar reported, "The stock market started 2024 with a blistering rally…But the relentless pace of gains has some watchers worried about soaring valuations on stock prices and frothy trading."

On Friday, major U.S. stock indices finished the week lower. However, U.S. Treasury bonds rallied as yields declined over the week.

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