(Bloomberg) — US stocks pared gains on Tuesday as investors parsed fresh data that showed the American economy remains robust, even as the Federal Reserve steps up its inflation battle.
(Bloomberg) — US stocks pared gains on Tuesday as investors parsed fresh data that showed the American economy remains robust, even as the Federal Reserve steps up its inflation battle.
The S&P 500 climbed as much as 1.7%, but trimmed gains after hawkish comments from St.
Louis Fed President James Bullard, who said inflation is a “serious problem” that the central bank must appropriately address. US Treasury yields rose, with the benchmark 10-year rate pushing past 3.90%.
Oil rallied, aided by a weakening dollar.
Investors are digesting a flurry of data on Tuesday, including core capital goods orders and consumer sentiment, that paint a picture of an economy that can likely withstand additional harsh central bank tightening.
Several Fed officials this week have already reiterated that the central bank will be aggressive in its efforts to tame inflation.
“The Fed’s tolerance for economic pain doesn’t bode well for risk assets.
Financial conditions will tighten further, and recession implies an earnings downturn is approaching,” wrote Seema Shah, chief global strategist at Principal Global Investors. “Get defensive, times are getting tougher.”
Every tumultuous market day is a step closer to recovery, according to Julie Biel, portfolio manager for Kayne Anderson Rudnick.
“I think there’s more realism, there’s more understanding that a soft landing is just impossible to really navigate when you’ve let out this much fiscal and monetary policy,” she said.
“It’s just not possible to engineer this with inflation this high. And so that realism is a positive thing. The thing is that we still kind of have a long way to go in terms of a possible correction.”
Beyond the US
The UK’s long-term bonds reversed earlier gains to slump on concerns over the nation’s fiscal and monetary policy, sending the 30-year yield to its highest since 2007.
The country’s stock and bond markets have lost at least $500 billion in combined value since Liz Truss took over as Prime Minister and traders remained wary of the risk that the currency could slump to parity with the dollar after the Bank of England indicated it may not act before November to stem the rout.
Volatility across markets was also reflected by the risk of future price swings, which reached the highest since the beginning of the pandemic, as shown by a Bank of America index.
Meanwhile, Germany suspects the damage to the Nord Stream pipeline system used to transport Russian gas to Europe was the result of sabotage.
Benchmark European gas prices climbed as much as 19% on Tuesday.
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Key events this week:
- Fed’s Mary Daly, Rafael Bostic, Charles Evans and ECB President Christine Lagarde speak at events, Wednesday
- Euro zone economic confidence, consumer confidence, Germany CPI, Thursday
- US initial jobless claims, GDP, Thursday
- Fed’s Loretta Mester, Mary Daly speak at events, Thursday
- China PMI, Friday
- Euro zone CPI, unemployment, Friday
- US consumer income , University of Michigan consumer sentiment, Friday
- Fed’s Lael Brainard and John Williams speak, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.4% as of 11:37 a.m.
New York time
- The Nasdaq 100 rose 0.7%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.4%
- The MSCI World index fell 1.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $0.9620
- The British pound rose 0.7% to $1.0764
- The Japanese yen was little changed at 144.69 per dollar
Cryptocurrencies
- Bitcoin rose 5.2% to $20,108.06
- Ether rose 3.7% to $1,373.76
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.96%
- Germany’s 10-year yield advanced 13 basis points to 2.24%
- Britain’s 10-year yield advanced 26 basis points to 4.51%
Commodities
- West Texas Intermediate crude rose 2.8% to $78.88 a barrel
- Gold futures rose 0.4% to $1,639.30 an ounce
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