US equities were largely unchanged one day after Federal Reserve policymakers signaled that interest rates would continue to rise for a while.
(Bloomberg) — US equities were largely unchanged one day after Federal Reserve policymakers signaled that interest rates would continue to rise for a while.
The S&P 500 index was up 0.2% and the Nasdaq 100 was flat as investors prepared for volatility during Friday’s $2.1 trillion options expiration.
Treasury yields rose a day after hawkish comments from St. Louis Fed President James Bullard, who said interest rates needed to rise at least to 5%-5.25% to curb inflation. His comments prompted markets to dial up their expectations for how high US rates might go.
Yet some investors said hawkish commentary did not necessarily mean rates would peak at higher levels than previously thought. Traders continue to bet that the Fed will reverse course and begin cutting rates in the later part of 2023.
“The Fed wants to ensure their job is not getting undone, the language is still robust and that there’s still a coordinated effort from board members to push on the hawkish button,” James Athey, investment director at Abrdn Investment Management Ltd., told Bloomberg Television. “That doesn’t mean the destination is necessarily a higher rate than where markets thought a week or two ago. I think they’re just trying to downplay investor’s spirits a bit.”
Fears are mounting though, that relentlessly rising rates will hit economic growth. Growth-sensitive copper and oil prices were poised for weekly losses, pressured by concerns over a worsening demand outlook. The Fed’s interest rate pressures on mortgage rates rippled through the US housing market, as sales of previously owned homes fell for a record ninth straight month in October.
Analysts at Bank of America Corp. warned that with a Fed policy pivot likely only in June or July, rate hikes and company earnings could prove a headwind to stocks. While investment inflows into equity funds swelled last week — lured by signs of a US inflation slowdown — “a fair chunk of the bear market rally is behind us,” they wrote.
Europe’s Stoxx index rose more than 1%, led by energy, banking and utilities, and is now on track to extend a four-week rising streak
Earlier, Hong Kong’s benchmark Hang Seng Index enjoyed a third straight week of gains, thanks to China’s steps to support the property sector and ease Covid restrictions. On Friday, the benchmark’s tech gauge touched a two-month high, led by Alibaba, which missed second-quarter revenues but upsized share buybacks.
Bitcoin was on course for a weekly gain even as the collapse of Sam Bankman-Fried’s FTX empire continues to rattle the crypto market.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 10:19 a.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average rose 0.3%, more than any closing gain since Nov. 10
- The Stoxx Europe 600 rose 1%, more than any closing gain since Nov. 10
- The MSCI World index fell 0.6% to the lowest since Nov. 10
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1% to $1.0349
- The British pound rose 0.3% to $1.1903
- The Japanese yen rose 0.2% to 139.89 per dollar
Cryptocurrencies
- Bitcoin fell 0.1% to $16,659.10
- Ether rose 0.6% to $1,212.77
Bonds
- The yield on 10-year Treasuries advanced two basis points to 3.79%
- Germany’s 10-year yield was little changed at 2.02%
- Britain’s 10-year yield advanced four basis points to 3.24%
Commodities
- West Texas Intermediate crude fell 3.8% to $78.55 a barrel
- Gold futures fell 0.5% to $1,769.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
