Stocks rose and Treasury yields fell after comments from Federal Reserve officials bolstered speculation the central bank is heading toward another pause in interest-rate hikes. Oil edged lower, following its biggest rally since April.
(Bloomberg) — Stocks rose and Treasury yields fell after comments from Federal Reserve officials bolstered speculation the central bank is heading toward another pause in interest-rate hikes. Oil edged lower, following its biggest rally since April.
The S&P 500 advanced for a third straight day, with some analysts also citing a rebound from oversold levels. Amazon.com Inc. gained amid its fall sale for Prime subscribers. PepsiCo Inc. climbed on a bullish forecast. A measure of US-listed Chinese shares added 3.1% as Bloomberg News reported the Asian nation is considering new economic stimulus. European equities rallied the most since November 2022.
Read: Stock Bulls Can’t Ignore Impact of Rates on Earnings This Season
Treasuries gained, catching up with the global bond rally on Monday, when cash trading in the US was closed. Ten-year yields sank 15 basis points to 4.65%. Fed swaps show about a 60% chance the Fed will stay on hold in December, compared with 60% odds of another hike by then, just a week ago. The dollar fell for a fifth straight day, its longest losing streak since July.
In a week jam-packed with speeches from US central bank officials, Fed Bank of Atlanta President Raphael Bostic said policy is restrictive enough to lower prices to the 2% goal. His Minneapolis counterpart Neel Kashkari said he wasn’t yet convinced that a surge in long-term Treasury yields would lessen the need for further rate hikes, saying it depends on what is driving the recent rise in borrowing costs.
“Policymakers have begun to acknowledge a lesser need for further policy action given financial conditions have tightened considerably after the recent surge in Treasury yields,” said Ben Jeffery at BMO Capital Markets. “This acknowledgment may have reduced angst around the need for additional rate increases.”
Investors will be watching for any hints in the September Fed meeting minutes due Wednesday that would suggest the Fed may not follow through with the last hike indicated in its economic projections, according to Anna Wong at Bloomberg Economics. Two critical upcoming economic indicators — Thursday’s consumer price index and Friday’s University of Michigan consumer-sentiment survey — may give a more definitive read, she noted.
“Risks to CPI this week are to the upside, reflecting dynamics in individual components such as auto prices. An upside surprise may see even more market buy-in to the downside, as investors are acutely concerned about rising energy prices,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments.
While Goodwin said an additional hike may still be in the cards, she cited the fact that market financial conditions are tightening — reflecting higher risk in the real economy, government funding, and geopolitical developments.
“This may be enough to key the Fed on pause,” Goodwin noted.
Read: US Consumers See Higher Near-Term Inflation, Tighter Credit
Global investors also kept a close eye on geopolitics. President Joe Biden said the US is “surging” military assistance to Israel in the wake of the Palestinian militant group Hamas’ surprise attack.
The shekel regained its footing as the central bank dueled short sellers to contain the market fallout from Israel’s conflict with militant group Hamas. The currency strengthened as much as 1% in the first half hour of trading on Tuesday and was little changed against the dollar.
Billionaire investor Paul Tudor Jones told CNBC the current geopolitical environment is the “most threatening and challenging” he’s ever seen in the wake of Hamas’s attack on Israel over the weekend and predicted the US will enter into a recession early next year.
European gas prices jumped, with Finland is on high alert as it suspects a gas pipeline leak in the Baltic Sea was caused by a deliberate act of destruction, fueling concerns about the safety of Europe’s energy infrastructure. Base metals sank amid fresh fears over property turmoil in China.
- Boeing Co. said it delivered 27 commercial jets in September, marking the third consecutive month that shipments have declined as manufacturing glitches put its annual target in jeopardy.
- General Motors Co. reached a contract with its Canadian union, ending a strike that began about 13 hours earlier at three plants in Ontario.
- LVMH’s sales growth softened in the third quarter as shoppers reined in spending on high-end Cognac and costly handbags, more evidence the post-pandemic luxury boom is waning.
- Drugmaker Mallinckrodt Plc won court approval for a new debt-reduction plan that will slash about $1 billion from the sum the company must pay victims of America’s opioid epidemic.
Key events this week:
- Germany CPI, Wednesday
- NATO defense ministers meeting in Brussels, Wednesday
- Russia Energy Week in Moscow, with officials from OPEC members and others, Wednesday
- US PPI, Wednesday
- Minutes of Fed’s September policy meeting, Wednesday
- Fed’s Michelle Bowman and Raphael Bostic speak at separate events, Wednesday
- Japan machinery orders, PPI, Thursday
- Bank of Japan’s Asahi Noguchi speaks, Thursday
- UK industrial production, Thursday
- US initial jobless claims, CPI, Thursday
- European Central Bank publishes account of September policy meeting, Thursday
- Fed’s Raphael Bostic speaks, Thursday
- China CPI, PPI, trade, Friday
- Eurozone industrial production, Friday
- US University of Michigan consumer sentiment, Friday
- Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off, Friday
- G20 finance ministers and central bankers meet as part of IMF gathering, Friday
- ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday
- Fed’s Patrick Harker speaks, Friday
Some of the main moves in markets:
- The S&P 500 rose 0.5% as of 4 p.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average rose 0.4%
- The MSCI World index rose 1.1%
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.4% to $1.0604
- The British pound rose 0.4% to $1.2286
- The Japanese yen fell 0.1% to 148.67 per dollar
- Bitcoin fell 0.6% to $27,409.41
- Ether fell 0.7% to $1,566.11
- The yield on 10-year Treasuries declined 15 basis points to 4.65%
- Germany’s 10-year yield was little changed at 2.77%
- Britain’s 10-year yield declined five basis points to 4.43%
- West Texas Intermediate crude fell 0.7% to $85.77 a barrel
- Gold futures rose 0.5% to $1,873.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Isabelle Lee and Liz Capo McCormick.
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