Wall Street shook off worries over the Bank of Japan policy tweak as another round of US data bolstered bets on the so-called Goldilocks scenario of an economy that’s neither running too hot nor too cold.
(Bloomberg) — Wall Street shook off worries over the Bank of Japan policy tweak as another round of US data bolstered bets on the so-called Goldilocks scenario of an economy that’s neither running too hot nor too cold.
The stock market powered ahead as key gauges of inflation showed further easing while Americans grew more optimistic about the economic outlook. When taken together with recent figures showing the US has remained fairly resilient despite aggressive rate hikes, the reports fueled speculation the Federal Reserve will be able to avoid a recession.
It’s a week “chock full of economic data that all points to a higher probability of a soft landing,” said Gina Bolvin, president of Bolvin Wealth Management Group. “This could be the catalyst to send the market to new highs.”
Almost every major group in the S&P 500 rose on Friday, with the equity benchmark up 1% and set for its third straight week of gains. The tech-heavy Nasdaq 100 climbed 2%. Megacaps outperformed, with Meta Platforms Inc. and Tesla Inc. advancing at least 3.5%. Intel Corp. rallied 6% as the chip pioneer gave a bullish sales forecast. Bond yields fell alongside the dollar.
In what looked like a “sell the rumor, buy the news” episode, US markets saw a reversal from moves on Thursday, when anxiety was running high in the run-up to the BOJ decision. Governor Kazuo Ueda surprised investors on Friday by announcing the central bank would allow yields to rise above a ceiling it now calls a point of reference. That paves the way for a future normalization of policy that has implications for a wide range of global assets and for markets heavily exposed to Japanese money.
Yields on 10-year Japanese government bonds jumped to their highest since 2014, while the yen seesawed between gains and losses as investors speculated whether this tweak was a precursor to more drastic changes for Japan’s ultra-easy monetary policy.
“Now that BoJ is out of the way, and they got away with their tweak to policy without much carnage in the fixed-income space, we can relax and hop back on board the carry train,” said Brad Bechtel, a strategist at Jefferies. “At least until we start seeing signs of some sort of hard landing scenario show up.”
Corporate Highlights:
- Shares of US regional lenders are on pace for the longest weekly streak of gains since March 2021, bolstered by a merger deal for PacWest Bancorp as the industry continues to recover from the regional bank failures earlier this year.
- Exxon Mobil Corp. fell short of analysts’ expectations with a third straight drop in profit — the longest decline since the 2014-2016 oil-market crash — amid weaker natural gas prices and shrinking returns from fuel sales.
- Procter & Gamble Co.’s sales and earnings both surpassed analysts’ projections as the maker of Gillette razors reported a boost from higher prices, and strength from its US business.
- Ford Motor Co. expects to see losses from electric vehicles hit $4.5 billion this year, up from an earlier estimate of $3 billion. That’s more than double the $2.1 billion the company lost on EVs last year.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.1% as of 11:37 a.m. New York time
- The Nasdaq 100 rose 1.9%
- The Dow Jones Industrial Average rose 0.7%
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index rose 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.4% to $1.1028
- The British pound rose 0.5% to $1.2857
- The Japanese yen fell 0.7% to 140.51 per dollar
Cryptocurrencies
- Bitcoin rose 0.9% to $29,402.1
- Ether rose 0.9% to $1,875.72
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.96%
- Germany’s 10-year yield advanced one basis point to 2.49%
- Britain’s 10-year yield advanced one basis point to 4.32%
Commodities
- West Texas Intermediate crude fell 0.2% to $79.96 a barrel
- Gold futures rose 0.8% to $2,000.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rob Verdonck, Tassia Sipahutar and Sujata Rao.
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