Bond yields rose and stocks fluctuated after solid economic reports reinforced the case for the Federal Reserve to keep interest rates higher for longer.
(Bloomberg) — Bond yields rose and stocks fluctuated after solid economic reports reinforced the case for the Federal Reserve to keep interest rates higher for longer.
Treasury 10-year yields climbed toward the highest since 2007. Energy shares led a rebound in stocks from session lows, while tech underperformed, with Nvidia Corp. slumping as the US is restricting the sale of chips the company designed specifically for the Chinese market. Goldman Sachs Group Inc. fell as it posted a second straight quarter of real-estate writedowns and a continued dealmaking slump — leaving the firm’s profitability at about half the level it’s targeting. Bank of America Corp. gained as traders reported their best third-quarter results in at least a decade while net interest income topped analysts’ estimates.
US retail sales increased last month by more than forecast in a broad advance that suggests durable household demand. Separate data showed factory production rose in September on firmer output of consumer goods, suggesting manufacturing is stabilizing.
“The data so far is extremely robust,” which keeps another rate hike in December on the table, said Gargi Chaudhuri, head of iShares investment strategy Americas at BlackRock told Bloomberg Television.
Swap contracts tied to Fed rate decisions showed traders are now pricing in roughly 60% odds that policymakers will raise interest rates by another quarter percentage point in January after holding steady in November and December.
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.
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.
- 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.
- Choice Hotels International Inc. offered to buy Wyndham Hotels & Resorts Inc. in a deal that would combine large companies in the affordable hotel space with brands including Super 8 and Quality Inn.
- 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 fell 0.2% as of 11:09 a.m. New York time
- The Nasdaq 100 fell 0.6%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.2% to $1.0579
- The British pound fell 0.2% to $1.2187
- The Japanese yen fell 0.2% to 149.74 per dollar
- Bitcoin rose 0.4% to $28,527.26
- Ether fell 0.7% to $1,577.52
- The yield on 10-year Treasuries advanced 12 basis points to 4.82%
- Germany’s 10-year yield advanced 10 basis points to 2.88%
- Britain’s 10-year yield advanced six basis points to 4.54%
- West Texas Intermediate crude rose 0.3% to $86.92 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.