Dollar Hits Highest Since March as US Yields Climb: Markets Wrap

The dollar hit the highest since March as Treasury yields climbed and stocks fell, with traders betting interest rates will remain elevated even if the Federal Reserve decides to go on hold. A rally in Brent oil to $90 a barrel added to concern about a flare-up in inflation.

(Bloomberg) — The dollar hit the highest since March as Treasury yields climbed and stocks fell, with traders betting interest rates will remain elevated even if the Federal Reserve decides to go on hold. A rally in Brent oil to $90 a barrel added to concern about a flare-up in inflation.

As the greenback advanced, options traders positioned for further gains — with one-year risk reversals around their most-bullish levels since April. Some analysts also cited weaker growth in China and Europe as one of the reasons for the dollar strength. Ten-year US yields rose to 4.25% amid a flurry of investment-grade bond sales. The S&P 500 hovered near 4,500. Tesla Inc. and Microsoft Corp. led megacaps higher.

Read: Bubble-Hunter Rob Arnott Sees a ‘Big Market Delusion’ in Nvidia

Fed Governor Christopher Waller said policymakers can afford to “proceed carefully” with tightening given recent data showing inflation continuing to ease. “There is nothing that is saying we need to do anything imminent anytime soon,” Waller told CNBC. Meantime, Fed Bank of Cleveland President Loretta Mester said the central bank may need to raise rates “a bit higher,” but stopped short of saying what officials should do at their next meeting.

“The Fed is sailing in shallow waters in a thick fog,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “It should be moving very slowly and be ready to halt or reverse its monetary tightening.”

Goldman Sachs Group Inc. now sees a 15% chance the US will slide into recession, down from 20% previously as cooling inflation and a still-resilient labor market suggest the Fed may not need to raise interest rates any further.

To Chris Senyek at Wolfe Research, last week’s “bad news is good news” trading action was a sign that the market continues to strongly believe in the “disinflation” and “soft landing” narratives that have driven up stocks over the past six months.

“Unfortunately, our sense is that bulls aren’t going to be able to have their cake and eat it too,” Senyek noted. “We still expect stickier-than-expected inflation into a persistent price-wage spiral, higher oil prices, and housing market strength, and that the FOMC will hike in November and/or December.”

September Trends

US equity investors are in for disappointment as economic growth is set to be weaker than expected this year, according to Morgan Stanley’s staunch bear, Michael Wilson.

“At current prices, markets are now expecting a meaningful reacceleration in growth that we think is unlikely this year, especially for the consumer,” Wilson wrote. “Potentially softer September and October data is not priced into many stocks and expectations.”

The worst month of the year for US equities is upon us, but a bevy of positive market signals suggest it may not be so bad this time around. While seasonal trends place September in last place for stock market performance, returns have been most robust in times the S&P 500 gained between 10% and 20% year-to-date through August, according to Bank of America Corp. chief technical strategist Stephen Suttmeier.

Such an advance through August has preceded a market move higher in the last four months of the year 91% of the time, with an average jump of 7.6%. If that trend holds up, the S&P 500 could rise to as high as 4,875 before 2023 closes out. That would imply a gain of about 8% from Friday’s close.

Corporate Highlights:

  • Private equity giant Blackstone Inc. and vacation home-rental company Airbnb Inc. climbed on news they will be added to the S&P 500 this month.
  • Oracle Corp. advanced after Barclays Plc upgraded the software company to overweight, calling it a “multi-year growth story.”
  • Digital World Acquisition Corp., which is working to take Donald Trump’s nascent media company public, climbed after reports that the blank-check firm won investor approval to extend its deadline for another year, bolstering hopes the deal will be completed.
  • Illumina Inc. named Agilent Technologies Inc.’s Jacob Thaysen as its next chief executive officer after former CEO Francis deSouza abruptly left the DNA-sequencing giant amid an investor proxy fight and regulatory opposition to a major acquisition. The shares fell.
  • Manchester United Plc sank after a report in the Mail On Sunday that said the Glazer family is going to take the club off the market after failing to receive offers that match their asking price.
  • Arm Holdings Ltd.’s initial public offering, planning to raise $4.87 billion at the top of its range, shows the premium valuation the British chip designer was seeking from a New York listing may not fully materialize.

Key events this week:

  • Eurozone retail sales, Wednesday
  • Germany factory orders, Wednesday
  • US trade, Wednesday
  • Canada rate decision, Wednesday
  • Bank of England Governor Andrew Bailey testifies to the UK parliament’s Treasury Select Committee, Wednesday
  • Federal Reserve issues Beige Book economic survey, Wednesday
  • Boston Fed President Susan Collins speaks, Wednesday
  • Dallas Fed President Lorie Logan speaks, Wednesday
  • China trade, forex reserves, Thursday
  • Eurozone GDP, Thursday
  • US initial jobless claims, Thursday
  • Bank of Canada Governor Tiff Macklem to speak on the Economic Progress Report, Thursday
  • Atlanta Fed President Raphael Bostic speaks, Thursday
  • New York Fed President John Williams participates in moderated discussion at the Bloomberg Market Forum, Thursday
  • Japan GDP, Friday
  • Germany CPI, Friday
  • US wholesale inventories, consumer credit, Friday

Some of the main moves in markets:


  • The S&P 500 fell 0.2% as of 12:36 p.m. New York time
  • The Nasdaq 100 rose 0.2%
  • The Dow Jones Industrial Average fell 0.2%
  • The MSCI World index fell 0.4%


  • The Bloomberg Dollar Spot Index rose 0.6%
  • The euro fell 0.6% to $1.0726
  • The British pound fell 0.4% to $1.2573
  • The Japanese yen fell 0.8% to 147.63 per dollar


  • Bitcoin fell 0.2% to $25,782.83
  • Ether rose 0.6% to $1,638.03


  • The yield on 10-year Treasuries advanced seven basis points to 4.25%
  • Germany’s 10-year yield advanced three basis points to 2.61%
  • Britain’s 10-year yield advanced six basis points to 4.53%


  • West Texas Intermediate crude rose 2.1% to $87.37 a barrel
  • Gold futures fell 0.7% to $1,952.50 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Jason Scott, Tassia Sipahutar, Sujata Rao and Isabelle Lee.

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