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Stocks Take Leg Higher on Fed Waller’s Comment: Markets Wrap

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Pimco Managing Director Jerome Schneider discusses the state of the US fixed income market with Romaine Bostick and Scarlet Fu on "Bloomberg Markets: The Close."
Pimco Managing Director Jerome Schneider discusses the state of the US fixed income market with Romaine Bostick and Scarlet Fu on "Bloomberg Markets: The Close."

US stocks clawed back some of this week’s losses amid a rally in technology shares and speculation that much of the bad news is already priced into the market. 

The S&P 500 Index rose for the first time in four days in a broad-based rally, with all but three of the 11 sectors gaining. The tech-heavy Nasdaq 100 jumped more than 1.5%. Google parent Alphabet Inc. gained after revealing a plan to cut 12,000 jobs. Netflix Inc. surged after reporting stronger-than-expected subscriber numbers.

Equity markets rallied despite a push higher in Treasury yields, suggesting that the 60/40 portfolio model could be making a comeback. Earlier this week, higher rates had weighed on risk sentiment amid hawkish comments from Federal Reserve and European Central Bank officials. 

Benchmarks climbed to session highs after on Friday after Fed Governor Christopher Waller said policy looks pretty close to sufficiently restrictive. Earlier, Philadelphia Fed President Patrick Harker repeated his view for more incremental steps in rate hike, while Kansas City Fed chief Esther George said the economy can avoid a sharp downturn.

Fed Set to Slow Hikes Again and Debate How Much Further to Go

“It’s notable that yields are up today yet Nasdaq is outperforming,” said Jonathan Krinsky, chief market technician for BTIG. “While this could be perceived as a short-term positive, if we are shifting to a ‘bad news is bad’ narrative where lower rates coincide with lower stocks, then it would make sense to see the inverse.”

Stocks Take Leg Higher on Fed Waller’s Comment: Markets Wrap

Earnings have also been in focus. Of the 55 S&P 500 companies that have reported results so far, only two-thirds have beaten analysts’ estimates, compared with the 80% positive surprise seen over the past several quarters.

“Fears of a recession seemed to be overriding sort of optimism from some companies which have reported better-than-expected results,” said Fiona Cincotta, senior financial markets analyst at City Index. “There is this understanding that earnings are probably going to be weaker, but I think a lot of that’s being priced in.”

Oil contracts rose for a second day, with West Texas Intermediate crude heading for a weekly advance. Traders were emboldened by Chinese demand that’s been picking up after the nation abandoned harsh virus restrictions.

Copper held on to its fifth weekly increase in London, its best run since May 2021, with global supply risks persisting and inventories near historic lows.

Here are some of the main market moves:

Stocks

  • The S&P 500 rose 1.1% as of 1:46 p.m. New York time
  • The Nasdaq 100 rose 1.9%
  • The Dow Jones Industrial Average rose 0.4%
  • The MSCI World index rose 1%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.1% to $1.0847
  • The British pound was little changed at $1.2388
  • The Japanese yen fell 0.9% to 129.63 per dollar

Cryptocurrencies

  • Bitcoin rose 2.1% to $21,382.87
  • Ether rose 3% to $1,592.3

Bonds

  • The yield on 10-year Treasuries advanced nine basis points to 3.48%
  • Germany’s 10-year yield advanced 11 basis points to 2.18%
  • Britain’s 10-year yield advanced 10 basis points to 3.38%

Commodities

  • West Texas Intermediate crude rose 1.2% to $81.31 a barrel
  • Gold futures rose 0.2% to $1,928.60 an ounce

This story was produced with the assistance of Bloomberg Automation.

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