The S&P 500 and Dow Jones bounced back from early losses to finish lower Friday while the Nasdaq ended higher as investors bought the dip in tech shares. The Federal Reserve (Fed) kept its policy rate unchanged at 0.00 – 0.25%, but also upgraded its near-term economic growth to 6.5% for 2021 GDP. Relative to the December meeting, more committee members expected higher rates by 2023 YE. Still, the majority of members anticipate a policy hold through 2023, against market expectations for two to three rate hikes by then. The Fed will let expire a regulatory change that effectively lowered bank capital requirements, which was meant to encourage lending during the pandemic.  This caused bank stocks to fall, on average, by 2.2% Friday. The 10-year Treasury yield broke the 1.75% level for the first time in 14 months and has now moved up about 80 basis points this year. For the week, the Dow and S&P fell 0.5% and 0.8% respectively, snapping two-week winning streaks, while the Nasdaq also lost 0.8% to cap its fourth negative week in a row. The stock and bond market may continue to see volatility as there continues to be uncertainly around inflation, economic growth and the fed’s response to both.

 

Stimulus checks are finding their way into various sectors of the market. On Friday, FactSet said that U.S. equity inflows hit a weekly record of $56.76B in the week ending March 17, up sharply from $16.83B a week earlier. A new poll from Mizuho Securities also found that two out of five stimulus check recipients plan to invest at least some part of the proceeds into Bitcoin and stocks, while the Treasury distributed $242B in stimulus checks through March 17, or around 60% of the expected total.

 

Creating the first rail network linking the United States, Mexico and Canada, Canadian Pacific Railway has agreed to buy Kansas City Southern for $29B in cash and stock.  The acquisition would need the regulatory approval from the US Surface Transportation Board, and the companies expect the M&A process to take until mid-2022.

 

Covid vaccine distribution in the United States is getting creative. The juice maker Bolthouse Farms is paying workers a $500 bonus for getting vaccinated, while Krispy Kreme is giving employees four hours paid time off to get a shot — and customers a free doughnut if they have proof of immunization. The U.S. has given 124 million doses of the vaccine and averaged 2.49 million doses per day last week. At this rate, 75% of the U.S. will be vaccinated in 5 months, which could accelerate as more people hear about the free doughnuts.