Stocks rallied, defying calls from skeptics after the Federal Reserve’s decision, with traders cutting their bets on a rate hike as the drumbeat of recession grew louder amid an ugly economic print.
Shares climbed to a seven-week high, led by defensive groups that are often sought after in tough times. Bond yields sank and policy meeting date swaps showed bets that the federal funds rate will peak around 3.25 percent before the end of 2022, less than 100 basis points above the current level. In late trading, Amazon.com Inc. and Apple Inc. jumped, while Intel Corp. decreased after the results were reported.
Investors continued to buy into the idea that the Fed may soon ease the pace of tightening as data signaled the economy was losing momentum heading into the latter half of the year. It was a day after Jerome Powell’s remarks that hikes would slow down at some point sparked a strong market reaction that was slammed by Fed watchers who said traders had got it all wrong as tighter monetary policy was needed. conditions to overcome inflation.
“Bad news turns into good news,” said Michael Aron, chief investment strategist at State Street Global Advisors. “When the economy slows, measures of inflation are likely to decline. This will bring the end of the tightening cycle closer and the markets will like that.”
For LPL Financial’s Jeffrey Roach, the Fed is likely to interpret the decline in real growth as confirmation of a slowdown in the pace of tightening. “Preliminary interest rate hikes ultimately mean smaller increases in the near term,” he added. Chris Lowe of FHN Financial said that based on Powell’s comments on Wednesday, employees won’t stop increasing just because the economy is contracting.
“They need to see real progress against inflation before they stop raising rates,” Lowe noted. “That being said, this recession will deepen before the economy begins to heal.”
Other corporate highlights:
- The profit of Honeywell International Inc. beat forecasts as a recovery in air travel and oil and gas investment helped boost sales.
- Hertz Global Holdings Inc. jumped after the car rental giant’s profits beat estimates, with revenue jumping on higher prices and a recovery in travel.
- Harley-Davidson Inc. won as profit and revenue beat forecasts, a sign the turnaround plan is helping the motorcycle maker overcome supply chain headaches.
- Comcast Corp. sank after its prized Internet business added no new customers in the latest quarter, its worst performance in decades.
- Southwest Airlines Co. said it faced high costs and delays in jet deliveries from Boeing Co., tarnishing a quarter in which the carrier beat Wall Street profit expectations.
Here are some key events to watch this week:
- Eurozone CPI, Friday
- US PCE Deflator, Personal Income, University of Michigan Consumer Attitudes, Friday
Some of the major moves in the markets:
Stock up
- The S&P 500 was up 1.2% at 4:00 PM in New York
- The Nasdaq 100 rose 0.9%.
- The Dow Jones Industrial Average rose 1 percent
- The MSCI World index rose 1.3 percent
Currencies
- The Bloomberg Dollar Spot Index was down 0.2 percent
- The euro fell 0.1 percent to $1.0186
- The British pound was little changed at US$1.2166
- The Japanese yen rose 1.7 percent to 134.29 per dollar
Bonds
- The 10-year Treasury yield fell 11 basis points to 2.67 percent
- Germany’s 10-year bond yield fell 12 basis points to 0.83 percent
- The yield on Britain’s 10-year bond fell nine basis points to 1.87 percent
Goods
- West Texas Intermediate crude fell 0.1% to $97.12 a barrel
- Gold futures rose 2% to $1,772 an ounce
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