It was another tough week for stocks and bonds, prompted by hawkish commentary on Monday from FOMC member Lael Brainard regarding the potential pace of Fed balance sheet reduction. That was followed up on Wednesday by the release of the FOMC meeting minutes from March, which exacerbated investor concerns.

The result was an abrupt reversal in the flattening trend that had gripped the Treasury market this year as the curve pivoted to bear steepening: 2y yields finished higher by 5bp, while 10y yields jumped 32bp, pushing the 2s10s curve back to +19bp by Friday’s close. See the Chart of the Week for a 2s10s time series.

Equities fell as a result, with long-dated growth stocks once again bearing the brunt of the selling pressure. In a return of 2022’s familiar pattern, defensive sectors (utilities, staples, healthcare, and real estate) plus energy outperformed, while other cyclicals and especially tech shares were weaker. Small caps generally fared worse than large caps, with the Russell 2000 now trailing the S&P 500 by more than 5% YTD. International stocks also finished lower on the week.

Commodities were mixed, with oil (WTI) finishing below $100/barrel for the second straight week while natural gas rose to an all-time high on Thursday before finishing a hair lower on Friday. Non-energy commodities also finished higher on the week.

Apart from the FOMC, most economic news last week was positive: services PMIs from S&P Global and ISM remain firmly in expansion territory, initial jobless claims fell, and consumer credit surged in fresh February data.