Fed-Obsessed Traders Lift Stocks as Yields Slide: Markets Wrap

(Bloomberg) — Wall Street saw another day of major reversal, with stocks posting their best week since June after a treasury defeat sputtered. The yen jumped as Japan intervened again to support the currency.

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At a time when traders were fixated on the interest rate outlook, it’s no surprise that all the drama in the world’s largest bond market would dictate sentiment. After being all over the place in early trading, stocks rose sharply as US yields fell from multi-year highs.

“This week’s story is all about the volatility of interest rates, the massive volatility in Treasuries,” said Keith Lerner, chief market strategist at Truist Advisory Services. “But overall, I’d say, relative to how much interest rates have risen, I’d say the market has held up pretty well there.”

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Traders also kept a close eye on the latest Fedspeak.

US central bankers said the next stage in their campaign to curb inflation will be to discuss how high interest rates should be raised and when to slow the pace of the hikes. St. Louis Fed President James Bullard and his San Francisco counterpart Mary Daly made it clear they expect the discussion to come to the table at the November meeting, but stressed the need to continue to tighten up.

Read: Fed’s Evans sees further rate hikes in the offing, then policy on hold

Equity funds are still seeing influx, with “final capitulation” not yet there, Bank of America Corp. strategists said. Global equity funds had inflows of $9.2 billion in the week to Oct. 19, according to a bank note citing EPFR Global data.

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“The stock market is trying to bottom out to hit the last leg of the bear market,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “It feels like a two-way market right now. There is a tug-of-war between the skeptics and those who think it’s time to own stock.”

He noted that the Fed isn’t done raising rates yet and valuations are still not as low as it would expect at the bottom of a bear market.

“We’re just not there yet,” Donabedian added.

Some of the key moves in markets:

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  • The S&P 500 rose 2.4% as of 4 p.m. New York time

  • The Nasdaq 100 rose 2.4%

  • The Dow Jones Industrial Average rose 2.5%

  • The MSCI World Index rose 1.5%

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currencies

  • The Bloomberg Dollar Spot Index fell 0.8%

  • The euro rose 0.8% to $0.9862

  • The British pound rose 0.6% to $1,1301

  • The Japanese yen rose 1.7% to 147.66 per dollar

cryptocurrency

  • Bitcoin rose 0.9% to $19,201.33

  • Ether rose 1.7% to $1,304.22

bonds

  • 10-year Treasury yield fell one basis point to 4.22%

  • German 10-year yield rose one basis point to 2.42%

  • British 10-year yield rose 14 basis points to 4.05%

Raw materials

  • West Texas Intermediate Crude Oil Up 0.8% to $85.17 a Barrel

  • Gold futures rose 1.4% to $1,660.30 an ounce

–With help from Vildana Hajric and Emily Graffeo.

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