Stocks, Bonds Rally With Inflation Data in Focus: Markets Wrap
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(Bloomberg) -- US stocks rose as fresh data added to evidence inflation may have peaked, strengthening the case for the Federal Reserve to moderate its pace of interest-rate hikes. Treasuries also ended Tuesday higher while the dollar fell.
The S&P 500 climbed 0.9% and the tech-heavy Nasdaq 100 closed at its highest level since Sept. 19. While equities soared for most of Tuesday’s session, it gave back some of its gains after an Associated Press report citing an unidentified US intelligence official said that Russian missiles landed in NATO-member Poland.
Commodities from oil to corn also jumped on geopolitical worries from Europe. While Poland later said an explosion near its eastern border with Ukraine killed two people, it didn’t confirm the Associated Press report.
Markets have turned risk-on in recent days, trading off a softer-than-expected US consumer price index reading that many reckon will allow the Fed to raise rates in half-point increments. While a slew of Fed speakers in recent days indicated that officials could slow their tempo, they also emphasized the central bank has more work to do to tame inflation.
On Tuesday, the producer price index for October came in at 8% year-on-year, undershooting the 8.3% estimate and further easing inflation concerns.
Still, some investors are not convinced the recent data will do much to move the Fed.
“Markets appear to be pricing in a best case scenario of a soft landing and falling inflation triggering a Fed pause,” Venu Krishna, head of US equity strategy at Barclays Plc. “In our view, this is not a given and remains a low probability scenario – these are just a few data points on inflation and it needs to be sustained. Even if the Fed eventually pauses, it might not be able to prevent a shallow recession.”
Read More: The Great Inflation Trade Falters, Whiplashing Momentum Players
Key events this week:
- US business inventories, cross-border investment, retail sales, industrial production, Wednesday
- Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
- ECB President Christine Lagarde speaks, Wednesday
- Eurozone CPI, Thursday
- US housing starts, initial jobless claims, Thursday
- Fed’s Neel Kashkari, Loretta Mester speak, Thursday
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.9% as of 4 p.m. New York time
- The Nasdaq 100 rose 1.5%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.3% to $1.0353
- The British pound rose 0.9% to $1.1863
- The Japanese yen rose 0.5% to 139.21 per dollar
Cryptocurrencies
- Bitcoin rose 2.6% to $16,816.92
- Ether rose 2.1% to $1,251.32
Bonds
- The yield on 10-year Treasuries declined seven basis points to 3.78%
- Germany’s 10-year yield declined four basis points to 2.11%
- Britain’s 10-year yield declined seven basis points to 3.29%
Commodities
- West Texas Intermediate crude rose 0.9% to $86.67 a barrel
- Gold futures rose 0.3% to $1,782.70 an ounce
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