Crude oil prices are up about 2% due to tight supplies
Government bond yields reached multi-year highs
Yen slips below 150 against the dollar
(Updates on US market opening, LONDON to NEW YORK dateline change, byline change)
By Stephen Culp
NEW YORK, Oct 20 (Reuters) – US stocks turned sharply higher and benchmark Treasury yields continued to rise after investors shrugged off the resignation of UK Prime Minister Liz Truss and focused on positive earnings and evidence concentrated that the Fed’s aggressive policy is beginning to have its intended effect.
All three major US equity indices overcame their initial indecisiveness to move into positive territory, and 10-year Treasury yields continued to march above 14-year highs.
“When sentiment is overly bearish, it’s usually a good time to invest,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “Sell the trumpet, buy the guns.”
Britain’s Prime Minister Liz Truss announced her resignation next week, ending a short six-week tenure marred by turmoil caused by poorly received economic policies that eroded confidence in her leadership.
A series of mixed corporate earnings and economic indicators provided some hints of an economic slowdown, but a drop in jobless claims showed that the Fed’s aggressive hike-rate campaign had little impact on the tight US job market.
“We have strong corporate earnings, a strong labor market and a slowing economy, but without the risk of sliding into a deep recession for now,” Pursche added. “The case for a soft landing or a mild recession could still hold true.”
The Dow Jones Industrial Average was up 283.99 points, or 0.93%, to 30,707.8, the S&P 500 was up 26.27 points, or 0.71%, to 3,721.43 and the Nasdaq Composite was up 119.60 points, or 1.12% to 10,800.10.
European stocks tumbled after Truss said she would be leaving 10 Downing Street but have recently posted solid gains.
The pan-European STOXX 600 index rose 0.35% and MSCI scores for global equities rose 0.57%.
Emerging market equities rose 0.03%. MSCI’s broadest index of Asia-Pacific stocks outside of Japan closed 0.28% lower, while Japan’s Nikkei lost 0.92%.
Benchmark Treasury yields continued to rise after economic data appeared to confirm that the Fed is unlikely to ease up in its aggressive campaign to contain inflation.
Benchmark 10-year bonds were last down 5/32 in price to 4.1506% from 4.129% late Wednesday.
The 30-year bond fell 16/32 in price to 4.1611% from 4.127% late Wednesday.
The greenback lost ground against a basket of foreign currencies as sterling strengthened, but market participants were wary of Japanese intervention in the yen, which hit 150 per dollar for the first time since 1990.
The dollar index fell 0.64%, while the euro rose 0.48% to $0.9818.
The Japanese yen rose 0.07% to 149.80 per dollar, while sterling was last traded at $1.1305, up 0.81% on the day.
Oil prices rose on signs of a tightening supply and news of China’s moves to ease COVID restrictions.
US crude was up 1.96% to $86.18 a barrel and Brent was last at $94.06, up 1.79% on the day.
Dollar weakness helped gold recover from a three-week low.
Spot gold rose 0.7% to $1,640.59 an ounce.
(Reporting by Stephen Culp; additional reporting by Huw Jones in London; editing by Kirsten Donovan)