US stocks rebounded on Friday as sentiment improved after traders analyzed comments from Federal Reserve officials who reiterated that the central bank needs to do more to curb the highest inflation in 40 years.
Although the S&P 500 rose on Friday, it still closed the week at its lowest level since December 2020, as investors struggled with a burst of data that intensified fears of recession. The technology-heavy Nasdaq 100 rose. Friday also brought the quarterly event known as the triple witch. The expiration of the $ 3.5 trillion options has so far come with limited downside volatility. Treasury yields rose along the curve, with 10-year yields around 3.2%. The dollar suffered two days of losses.
Markets rounded out for a week affected by rising interest rates, including the largest Federal Reserve move since 1994, a shocking rise in the Swiss National Bank and the recent rise in UK borrowing costs. Rate hikes are draining liquidity, causing losses on a number of assets. Traders are still assessing the path of rate hikes that the Federal Reserve could take and the impact it would have on the economy.
“After a painful week on Wall Street, investors are becoming optimistic that the Fed will remain committed to reducing inflation and that markets could be close to setting prices where the one-day rate will be at its highest. next year, “said Edward Moya, a senior. market analyst at Oanda.
Federal Reserve Chairman Jerome Powell said Friday that the central bank is “very focused” on bringing inflation back to 2% and that there is likely to be another 75 basis point increase or a 50 basis point move. at the July meeting. Kansas City Federal Reserve Bank President Esther George said she opposed Wednesday’s decision by the Fed because the move, combined with the central bank’s declining balance sheet, creates uncertainty about the outlook.
“I think we need to work on the basis that the macroeconomic and investment environment will remain potentially very fragile,” said Christian Nolting, global investment director at Deutsche Bank’s private bank. “The recovery will not be easy, and even in the most optimistic cases, for example, about China’s economic reopening, problems such as the supply chain disruption will take time to resolve.”
May US factory production data pointed to lower demand as production declined unexpectedly. Meanwhile, May industrial production rose, but below estimate.
Global equities are facing one of their worst weeks since the 2020 pandemic-induced turmoil, and some investors are unsure whether assets have sunk enough to trade in the hardening cycle.
“The short-term recession has become a conclusion for many investors; the only questions now are its duration and the severity of its impact on earnings, “Chris Harvey of Wells Fargo wrote in a note.
Compared to the last two bear markets that were also associated with overflowing inflation, the current one, at six months, has a long way to go, Harvey said. The fall of 1980-1982 lasted just over 20 months, as did the fall between 1973 and 1974.
Bitcoin flirted with the key US $ 20,000 level, after breaking its longest streak of losses in Bloomberg data dating back to 2010 on Friday before. As a sign of the deepening turmoil in the crypto community, Babel Finance this week became the second largest digital asset lender to freeze withdrawals, telling customers it is facing “pressures of unusual liquidity “as it struggles with the recent market crashes. Oil fell as traders weighed in on the prospect of slower economic growth against scarce supply.
“The market continues to falter over the narrative of the year, between monetary normalization due to inflation and the error of monetary policy: a source of sustained volatility for equity valuations,” Florian said. Ielpo, macro head of Lombard Odier Asset Management.
U.S. equities raised $ 14.8 billion during the week to June 15, its sixth consecutive week of additions, according to Bank of America Corp., citing EPFR Global data. In total, US $ 16.6 billion flowed into global stocks during the period, while bonds had the largest repayments since April 2020 and came out at just over $ 50 billion in cash, according to the data. In a separate report, BofA raised European equities to negative neutrals, saying the impact of economic news now comes at a price.
Some of the main movements in the markets:
Stocks
- The S&P 500 was up 0.2% at 4:00 p.m. New York time
- The Nasdaq 100 was up 1.2%.
- The Dow Jones Industrial Average fell 0.2%.
- The MSCI World Index fell 2.4%.
Coins
- The Bloomberg Dollar Spot index rose 0.8%.
- The euro fell 0.5% to $ 1.0494
- The British pound fell 1.1% to $ 1.2213
- The Japanese yen fell 2.1% to $ 134.98
Good
- The 10-year Treasury bond yield rose three basis points to 3.23 percent
- Germany’s 10-year yield fell five basis points to 1.66%.
- The 10-year yield in the UK fell two basis points to 2.50 per cent
Goods
- West Texas Intermediate crude fell 6.3% to $ 110.22 a barrel
- Gold futures fell 0.5% to $ 1,839.90 an ounce