Wall Street stocks made up for their losses and ended the day higher, while US government bond rates slowed their gains. This was because investors were looking at good economic data and signs from the Federal Reserve that they were going to be careful with interest rates.
US unemployment claims went down, but Atlanta Fed President Raphael Bostic said he liked “slow and steady” quarter-point rate increases to limit economic risk.
This assisted Wall Street equities in recovering from an initial dip. The Dow Jones Industrial Average (.DJI) went up by more than 1%. This was helped by Salesforce Corp (CRM.N), whose shares went up by about 11.5% after the cloud-based software company gave a positive outlook for full-year earnings and announced that it would buy back four times as many shares as before.
The S&P 500 (.SPX) and Nasdaq Composite (.IXIC) both climbed roughly 0.75%, despite Tesla Inc (TSLA.O) dropping over 6% after the company failed to introduce a much-anticipated tiny, inexpensive electric vehicle.
After falling at first, European stocks (.STOXX) went up 0.5%, even though inflation data for the eurozone showed that the European Central Bank should raise its already high rates by another 50 basis points this month.
Consumer price inflation in the eurozone’s 20 member countries fell to 8.5% in February from 8.6% in January, slightly more than the 8.2% forecast by economists polled by Reuters.
The MSCI World Index (.MIWD00000PUS) increased by 0.37%.
Kevin Gardiner, a global investment strategist at Rothschild & Co., says that the stock and bond markets have been affected by different things in the past few weeks. Stocks are concerned about the prospect of squeezed corporate profitability, while bonds are concerned about inflation and interest rate expectations.
“The economic impact of tightening is still a mystery.” Profitability may not be so vulnerable, at least not yet,” he stated.
Overnight, both benchmark government bonds and stocks took a hit as inflation readings from Germany and the United States reinforced predictions that interest rates would rise and stay there for a longer period of time.
The yield on Germany’s 2-year government bonds has risen to its highest level since October 2008.
Manufacturing production in the United States fell for the fourth consecutive month in February, but a measure of raw material costs rose last month, raising fears that inflation would continue persistent.
“Economic data has surprised to the upside,” said Steven Oh, PineBridge Investments’ global head of credit and fixed income. Any unexpected data result will prompt officials to be more aggressive, he said, and this has reset market expectations.
Points of Pressure
Government bond yields in the United States have risen. Benchmark 10-year Treasury yields were near a four-month high of 4.066%, while two-year yields were also near a new 16-year high of 4.889%.
Fed funds futures linked to the Fed’s policy rate predict that the rate will be in the 5.5%-5.75% range by September, up from the current range of 4.5%-4.75%.
“We expect interest rates to remain higher for longer, and we expect stock market volatility to continue,” Wells Fargo Investment Institute analysts wrote on Thursday, adding that stronger-than-expected economic statistics this winter pushed their recession forecast into the second half of 2023.
The Rebound of the Dollar Continues
The US dollar has risen to $104.968 in currency markets. The index is presently up approximately 1.4% for the year, but it is still down from a peak of around $114 in September.
The euro fell 0.65% and the pound fell 0.67%, as higher-than-expected inflation data increased pressure on the ECB to boost interest rates.
Silvergate Capital (SI.N) shares dropped 57% after the cryptocurrency-focused bank said it would delay its annual report and look at its ability to continue as a going concern. Bitcoin was last trading at $23,461, down approximately 0.5%.
Oil prices rose little, bolstered by evidence of a strong economic recovery in top crude importer China and soothing concerns about rapid US rate hikes. US crude increased 0.32% to $77.94 per barrel, while Brent was up 0.23% to $84.50.
The spot price of gold was $1,836 per ounce.
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