US stocks rose as investors recalibrate their expectations in response to Federal Reserve officials indicating that they’ll continue to raise interest rates but are open to slowing their tempo.
A batch of upbeat earnings also buoyed sentiment.
(Bloomberg) — US stocks rose as investors recalibrate their expectations in response to Federal Reserve officials indicating that they’ll continue to raise interest rates but are open to slowing their tempo.
A batch of upbeat earnings also buoyed sentiment.
The S&P 500 and the Nasdaq 100 rose. Analog Devices Inc. climbed after giving a bullish forecast for the current period. Best Buy Co. jumped after raising its profit forecast.
Abercrombie & Fitch Co. and American Eagle Outfitters Inc. also rose after reporting results that beat estimates. Retailers clearing out their inventories with a series of sales could help reduce inflation, which could ultimately make the Fed turn dovish.
The dollar weakened against all major currencies. Treasury yields slipped. Oil rose after Saudi Arabia pushed back against reports of a potential OPEC+ production increase.
Fed officials have broadly maintained their steadfast stance to fight inflation.
Yet San Francisco Fed President Mary Daly also said that officials need to be mindful of the lags in the transmission of policy changes, while her Cleveland counterpart Loretta Mester said she’s open to slowing the pace of rate hikes.
On Tuesday, the Richmond Fed Manufacturing Survey came in slightly below expectations, with data confirming the peak inflation narrative.
“We have still got a little ways to go and a lot more data to come out before the next Fed meeting.
So it’s a lot of headline-driven moves that are really based off of two things: one is Fedspeak, and the other is the China zero-Covid policy changes,” Shawn Cruz, head trading strategist at TD Ameritrade, said in an interview.
“Because you’re getting a lot of contradictory-type headlines coming out, it’s driving volatility in the market.”
Thanksgiving week in the US also tends to carry a “historically bullish tone” for stocks, Craig Johnson, chief market technician at Piper Sandler, said in a note.
The week has started with a dip on Monday and then improves around the Thursday holiday about 68% of the time since 1950, he said.
China’s Covid control restrictions are still weighing on investors across the globe.
These restrictions now impact a fifth of China’s economy. Shutdowns can have a negative impact on supply-chain dynamics and possibly exacerbate inflation issues across economies. Chinese stocks listed in the US fell on Tuesday.
In Asian trading on Tuesday, Hong Kong stocks slid as China’s daily virus infections climbed to near the highest on record.
Meanwhile, the OECD said the world’s central banks must continue to raise interest rates to fight soaring and pervasive inflation, even as the global economy sinks into a significant slowdown.
The unexpected surge in prices and its impact on real incomes is hurting people everywhere, creating problems that will only worsen if policy makers fail to act, the Paris-based organization said.
Key events this week:
- OECD releases Economic Outlook, Tuesday
- Fed’s Loretta Mester and James Bullard speak, Tuesday
- S&P Global PMIs: US, Euro area, UK, Wednesday
- US MBA mortgage applications, durable goods, initial jobless claims, University of Michigan sentiment, new home sales, Wednesday
- Minutes of the Federal Reserve’s Nov.
1-2 meeting, Wednesday
- ECB publishes account of its October policy meeting, Thursday
- US stock and bond markets are closed for the Thanksgiving holiday, Thursday
- US stock and bond markets close early, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.6% as of 10:38 a.m.
New York time
- The Nasdaq 100 rose 0.2%
- The Dow Jones Industrial Average rose 0.8%
- The Stoxx Europe 600 rose 0.8%
- The MSCI World index fell 0.8%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.3% to $1.0277
- The British pound rose 0.5% to $1.1877
- The Japanese yen rose 0.6% to 141.27 per dollar
Cryptocurrencies
- Bitcoin rose 3.4% to $16,160.94
- Ether rose 2.8% to $1,124.18
Bonds
- The yield on 10-year Treasuries declined four basis points to 3.79%
- Germany’s 10-year yield was little changed at 1.99%
- Britain’s 10-year yield declined four basis points to 3.14%
Commodities
- West Texas Intermediate crude rose 2% to $81.65 a barrel
- Gold futures rose 0.3% to $1,760.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee and Felice Maranz.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
