Treasury Yields Climb as Hot Data Fuel Fed Wagers: Markets Wrap

Treasury yields climbed and stocks struggled after solid economic reports reinforced the case for the Federal Reserve to keep interest rates higher for longer.

(Bloomberg) — Treasury yields climbed and stocks struggled after solid economic reports reinforced the case for the Federal Reserve to keep interest rates higher for longer.

Two-year US yields hit the highest since 2006, while those on 10-year notes jumped 13 basis points to 4.83%. Swap contracts tied to Fed rate decisions showed traders are pricing in more than 60% odds that policymakers will raise interest rates by another quarter percentage point in January after holding steady in November. A move in December is considered possible, but less likely than January.

The S&P 500 erased gains, led by losses in its most-influential group — technology. Nvidia Corp. slumped as the US is restricting the sale of chips the company designed for the Chinese market. Goldman Sachs Group Inc. fell amid a 33% slide in profit. Bank of America Corp. advanced after traders reported their best third-quarter results in more than a decade.

“Good news about the economy is once again bad news, since it will keep policymakers on the fence on delivering more tightening,” said Edward Moya, senior market analyst for the Americas at Oanda. “It seems the US economy isn’t ready to head into a recession just yet.”

Retail sales exceeded all forecasts and industrial production strengthened last month, fresh evidence of a resilient American consumer whose spending is helping stabilize manufacturing. The reports prompted a slew of economists, from Goldman Sachs to JPMorgan Chase & Co. and Morgan Stanley, to boost their tracking estimates for third-quarter gross domestic product.

Fed Bank of Richmond President Thomas Barkin said policymakers “have time” to work out whether they can hold interest rates steady or if they need to raise them further to get inflation to policymakers’ 2% goal.

Read: One Regional Fed Board Sought to Hike Discount Rate in September

Traders also kept a close eye on the latest geopolitical events, with President Joe Biden set to travel to Israel Wednesday as a show of solidarity after the Oct. 7 attack by Hamas — which is designated a terrorist organization by the US and European Union. The Israeli military struck the south of the Gaza Strip after ordering people to seek refuge there.

The Bank of Israel underscored the urgency of steadying the shekel following its slide to an eight-year low, reversing expectations among traders who bet on a big interest-rate cut as soon as next week. 

Elsewhere, the Bank of Japan is likely to discuss raising its inflation projection for fiscal year 2023 and 2024 at its policy meeting later this month, extending the period in which it sees prices hitting or exceeding its 2% goal, according to people familiar with the matter. Following news of the central bank price view, the yen briefly strengthened.

Corporate Highlights

  • United Airlines Holdings Inc. is projecting a fourth-quarter profit that falls short of analysts’ estimates as the carrier faces pressure from a suspension of flights to Tel Aviv and higher jet fuel costs.
  • Chesapeake Energy Corp. is considering an acquisition of rival natural gas producer Southwestern Energy Co., according to people familiar with the matter.
  • U.S. Bancorp surged after the Fed released it from a commitment to meet requirements for larger banks by the end of next year.
  • Bank of New York Mellon Corp. reported earnings that beat estimates, as higher interest rates boosted the firm’s revenue.
  • Johnson & Johnson raised its 2023 revenue outlook as some older drugs beat sales estimates, including its bestseller Stelara that will face generic competition next year.
  • Wyndham Hotels & Resorts Inc. called Choice Hotels International Inc.’s takeover offer “underwhelming,” rejecting a proposal that would create a dominant player in the budget hotel space.
  • Dollar Tree Inc. climbed as Goldman Sachs raised its recommendation on the retailer to buy from neutral, based on its strong earnings growth potential.

Key events this week:

  • Reserve Bank of Australia Governor Michele Bullock speaks, Wednesday
  • China GDP, retail sales, industrial production, Wednesday
  • UK CPI, Wednesday
  • Eurozone CPI, Wednesday
  • Morgan Stanley, Netflix, Tesla earnings, Wednesday
  • Federal Reserve issues Beige Book economic survey, Wednesday
  • Philadelphia Fed President Patrick Harker and New York Fed President John Williams speak at separate events, Wednesday
  • Australia unemployment, Thursday
  • Japan trade, Thursday
  • China property prices, Thursday
  • US initial jobless claims, existing home sales, leading index, Thursday
  • Federal Reserve Chair Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker, Dallas Fed President Lorie Logan speak at different events, Thursday
  • Japan CPI, Friday
  • China loan prime rates, Friday
  • Philadelphia Fed President Patrick Harker speaks, Friday

Some of the main moves in markets:


  • The S&P 500 was little changed as of 4 p.m. New York time
  • The Nasdaq 100 fell 0.3%
  • The Dow Jones Industrial Average was little changed
  • The MSCI World index rose 0.2%


  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.1% to $1.0575
  • The British pound fell 0.3% to $1.2183
  • The Japanese yen fell 0.2% to 149.78 per dollar


  • Bitcoin rose 0.4% to $28,531.38
  • Ether fell 1.5% to $1,564.84


  • The yield on 10-year Treasuries advanced 13 basis points to 4.83%
  • Germany’s 10-year yield advanced 10 basis points to 2.88%
  • Britain’s 10-year yield advanced three basis points to 4.51%


  • West Texas Intermediate crude rose 0.8% to $87.31 a barrel
  • Gold futures were little changed

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Emily Graffeo.

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