Wall Street got more signs the Federal Reserve’s war against inflation isn’t breaking the economy — or at least not yet — with traders sending Treasury yields soaring amid bets on further rate hikes.
(Bloomberg) — Wall Street got more signs the Federal Reserve’s war against inflation isn’t breaking the economy — or at least not yet — with traders sending Treasury yields soaring amid bets on further rate hikes.
Bonds sold off across the curve, with two-year yields jumping 15 basis points to 4.86%. Swap markets now indicate a 50% chance of a second Fed hike by year-end. The dollar climbed. The S&P 500 posted a mild advance, with the stock market seeing heightened instability as traders adjust their positions at the end of the quarter.
Financial companies led gains as the biggest US lenders passed the Fed’s stress test, clearing the way for payouts. Wells Fargo & Co. and JPMorgan Chase & Co. rallied at least 2.7%. The megacap space saw another session of mixed performance, with Tesla Inc. rising and Google’s parent Alphabet Inc. moving lower.
Keep Hiking
US jobless claims fell by the most since October 2021 in a week that included the Juneteenth holiday. Gross domestic product was revised up notably to a 2% annualized advance in the first quarter. Key gauges of inflation watched closely by the Fed were revised down — while still running well above the central bank’s target.
“The market is processing the recent strength in the economic data in both positive and negative ways, as solid economic data means that the economy is more resilient, but it also emboldens the Federal Reserve to keep raising interest rates,” said Carol Schleif, chief investment officer at BMO Family Office.
Fed Bank of Atlanta President Raphael Bostic said he favors keeping borrowing costs on hold, but that Chair Jerome Powell and other colleagues don’t agree with him. Powell is signaling keenness to lift rates, having told a conference in Madrid just hours earlier that acting at consecutive policy meetings isn’t “off the table.”
Key events this week:
- China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday
- US personal income and spending, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.3% as of 11:39 a.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.3% to $1.0881
- The British pound fell 0.2% to $1.2610
- The Japanese yen fell 0.2% to 144.73 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to $30,526.2
- Ether rose 1.2% to $1,853.34
Bonds
- The yield on 10-year Treasuries advanced 13 basis points to 3.84%
- Germany’s 10-year yield advanced 10 basis points to 2.41%
- Britain’s 10-year yield advanced five basis points to 4.37%
Commodities
- West Texas Intermediate crude fell 0.6% to $69.13 a barrel
- Gold futures fell 0.2% to $1,917.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller, Sujata Rao, John Viljoen, Peyton Forte and Carly Wanna.
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