GLOBAL MARKETS – Wall Street stocks and Treasury yields rise on Fed hawkish comments
(Afternoon US Trade Updates)
* US stocks rebound, echoing gains in Europe
* 10-year Treasury yields hit their highest level since 2019
* Brent price rises again
* Gold drops, bitcoin advances
By Lawrence Delevingne
BOSTON, March 22 (Reuters) – U.S. stocks regained ground on Tuesday as Treasury yields and Brent crude oil prices continued to climb as investors adjusted their expectations of higher interest rates following to hawkish comments from the US Federal Reserve.
The Nasdaq led major Wall Street indexes higher, rising about 1.75% as investors bought lower tech stocks and acquired bank stocks, such as Wells Fargo & Co, which are benefiting from lower rates. higher interest for borrowers.
The Dow Jones Industrial Average rose 258.84 points, or 0.75%, to 34,811.83, and the S&P 500 gained 47.16 points, or 1.06%, to 4,508.34.
Fed Chairman Jerome Powell said on Monday that the central bank could act “more aggressively” to raise rates to fight inflation, possibly raising more than 25 basis points in a or more meetings this year.
The market is pricing a 72.2% chance that the Fed will raise the fed funds rate by 50 basis points at the policymakers’ meeting in May, up from a chance of just over 50% on Monday.
At around 1745 GMT, the 10-year US Treasury yield was at 2.377%, having hit its highest level since 2019. The 2-year note also rose, to 2.1683% from 2.134%.
“The degree of difficulty for Jerome Powell’s Fed to pull off a soft landing for the economy is about the same as Captain Sullenberger’s heroic emergency landing on the Hudson River,” said manager Aaron Clark. portfolio manager at GW&K Investment Management in Boston, referring to the 2009 US Airways plane landing after its engines failed.
“The market remains in a tug of war between a recession-causing policy error and a resilient economy with a strong consumer and business sector,” Clark wrote in an email.
Shares also rose in Europe. The STOXX 600 gained 0.85%, after climbing in recent sessions to hit a one-month high. London’s FTSE 100 gained almost 0.5%.
The MSCI World Equity Index, which tracks stocks from 50 countries, rose about 1%.
Matthias Scheiber, global head of multi-asset portfolio management at Allspring Global Investments in London, said the rally in equities could be a case where investors buy the dip, but growth stocks will struggle if the yield American 10-year bond was close to 2.5%.
“We saw the big rise in yields yesterday and we see that continuing today over the longer term, which should put pressure on equities. … It will be difficult for equities to have a positive performance.”
JPMorgan took a different view and said 80% of its clients plan to increase their equity exposure, which is a record.
“With light positioning, weak sentiment and geopolitical risks likely to subside over time, we believe the risks are on the upside,” JPMorgan’s strategists wrote in a note to clients.
“We believe investors should add risk in areas that have outpaced the downside such as innovation, technology, biotech, emerging/China markets and small caps. These segments are pricing in a severe global recession. , which will not materialize, in our view.”
The conflict in Ukraine continued to weigh on sentiment. US President Joe Biden has issued one of his starkest warnings to date that Russia is considering using chemical weapons.
Oil prices first retreated on Tuesday after jumping the day before. But the price of Brent crude was most recently at $116.49, up 0.75% on the day. US crude fell 0.04% to $112.07 a barrel.
The US dollar index and euro were flat on Tuesday after Monday’s losses.
Spot gold fell 0.7% to $1,922.04 an ounce, under pressure from the Fed chief’s hawkish approach to tackling inflation.
The cryptocurrency bitcoin rose around 3.7% to around $42,544, adding to gains since its intraday low of $34,324 on Feb. 24, when Russia invaded Ukraine.
(Reporting by Lawrence Delevingne in Boston and Elizabeth Howcroft in London Editing by Jonathan Oatis, Matthew Lewis and Leslie Adler)