US stocks fluctuated as a slew of Federal Reserve officials rehashed their higher-rates-for-longer message.
(Bloomberg) — US stocks fluctuated as a slew of Federal Reserve officials rehashed their higher-rates-for-longer message.
The S&P 500 had climbed as much as 0.9%, after Fed Vice Chair Lael Brainard acknowledged the need to monitor the impact rising borrowing costs could have on global-market stability.
It pared gains as investors contend with continued strength in personal consumption expenditure, one of the Fed’s preferred inflation gauges. US Treasury yields slid, with the benchmark 10-year rate around 3.73%.
Fed officials, all week, have been drilling in the message that they’ll continue to be aggressive to combat inflation.
Friday’s comments came with some nuance. While Richmond Fed’s Thomas Barkin said key pressures stoking price growth are showing some signs of easing, San Francisco’s Fed Mary Daly said incoming data will determine how much the Fed will raise interest rates by.
Investors now seem to be getting comfortable that tighter financial conditions will slow growth, said Dennis DeBusschere, founder of 22V Research.
US long-term inflation expectations also continued to ease in September, which helped lift consumer sentiment from the previous month despite growing economic uncertainty.
“The Fed is the only game in town,” said Brian Levitt, Invesco’s global market strategist.
“Brainard’s comments provide hope. The Fed wants to slow growth, but not crush it.”
A bruising session on Wall Street Thursday had already taken the S&P 500 down 2% to the lowest in almost two years and sent the Nasdaq 100 tumbling almost 4%.
The S&P 500 is headed for its third straight quarter of losses for the first time since 2009 and the Nasdaq 100 for the first time in 20 years.
“By no means do I think we get a soft landing, but too much Fed-based negativity is priced in, and the data could start tilting toward lower inflation than the market — and Fed — have been fixated on,” wrote Peter Tchir, head of macro strategy at Academy Securities.
“I continue to believe the ultimate lows will be in a true “risk-off” scenario, where bonds rally while stocks fall. But I think for now, both can limp into month-end and get some strength.”
Fears of global recession are still mounting as the threat of higher rates saps growth.
The case of the UK shows how faultlines between government and central bank policy on tackling inflation can erupt into a crisis. Hopes evaporated that the British government would succumb to pressure to back down from tax cuts that brought the pound to the edge of dollar parity.
Traders are now gauging the next pressure points that will further erode gains won by the Bank of England’s billions in bond-market buying in the past two days.
Read more: UK Treasury Hasn’t Sought to Speed Up Budget Watchdog’s Forecast
Geopolitical tensions also continued to simmer as Vladimir Putin vowed his annexation of four occupied regions in Ukraine is irreversible.
Key events this week:
- Euro zone CPI, unemployment, Friday
- University of Michigan consumer sentiment, Friday
- Fed’s John Williams to speak, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 11:55 a.m.
New York time
- The Nasdaq 100 rose 0.1%
- The Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 rose 1.3%
- The MSCI World index fell 1.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.3% to $0.9789
- The British pound rose 0.1% to $1.1131
- The Japanese yen fell 0.2% to 144.70 per dollar
Cryptocurrencies
- Bitcoin rose 1.4% to $19,783.43
- Ether rose 1% to $1,351.2
Bonds
- The yield on 10-year Treasuries declined six basis points to 3.73%
- Germany’s 10-year yield declined seven basis points to 2.11%
- Britain’s 10-year yield declined four basis points to 4.10%
Commodities
- West Texas Intermediate crude fell 0.2% to $81.08 a barrel
- Gold futures rose 0.8% to $1,681.80 an ounce
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