Stocks rallied, defying calls from skeptics after the Federal Reserve’s decision, with traders shunning bets on rate hikes as the drumbeat of recession grew louder amid an ugly economic impression.
Shares rose to a seven-week high, led by defensive groups, which are often sought after in tough times. Bond yields sank and swaps benchmarking policy meeting dates showed bets that the fed funds rate will peak around 3.25 percent before the end of 2022, less of 100 basis points above its current level. In the afternoon, Amazon.com Inc. and Apple Inc. jumped, while Intel Corp. dropped after the results were reported.
Investors continued to buy into the idea that the Fed could soon slow the pace of tightening as data indicated the economy is losing momentum heading into the back half of the year. It came a day after Jerome Powell’s remarks that hikes would slow at some point, prompting a powerful market reaction that was slammed by Fed watchers who said traders were wrong, since tighter financial conditions are needed to beat inflation.
“Bad news is turning into good news,” said Michael Arone, chief investment strategist at State Street Global Advisors. “When the economy slows down, measures of inflation will likely fall. That will bring the end of the tightening cycle closer and the markets will like that.”
For LPL Financial’s Jeffrey Roach, the Fed will likely interpret the drop in real growth as confirmation to slow the pace of tightening. “Front loading rate hikes eventually mean smaller hikes in the near future,” he added. FHN Financial’s Chris Low said that based on Powell’s comments on Wednesday, officials will not stop taking hikes just because the economy is contracting.
“They need to see real progress against inflation before they stop raising rates,” Low noted. “With that in mind, this recession will deepen before the economy begins to heal.”
Other Company Highlights:
- The benefits of Honeywell International Inc. beat estimates as a rebound in investment in air travel and oil and gas helped spur sales.
- Hertz Global Holdings Inc. soared as the car-rental giant’s earnings beat estimates on increased revenue from higher prices and a pick-up in travel.
- Harley-Davidson Inc. gained as profit and revenue beat estimates, a sign that a turnaround plan is helping the motorcycle maker overcome supply chain headaches.
- Comcast Corp. slumped after its prized Internet business added no new customers last quarter, its worst performance in decades.
- Southwest Airlines Co. said it is grappling with high costs and delays in the delivery of planes by Boeing Co., cutting short a quarter in which the company beat Wall Street’s profit expectations.
Here are some of the key events to watch this week:
- Eurozone CPI, Friday
- US PCE Deflator, Personal Income, University of Michigan Consumer Sentiment, Friday
Some of the main movements in the markets:
stocks
- The S&P 500 was up 1.2% at 4:00 p.m. New York time
- The Nasdaq 100 rose 0.9%.
- The Dow Jones Industrial Average rose 1%.
- The MSCI World Index rose 1.3%.
coins
- The Bloomberg Dollar Spot index fell 0.2%.
- The euro fell 0.1% to $1.0186
- The British pound was little changed at US$1.2166
- The Japanese yen rose 1.7% to 134.29 per dollar
good ones
- The 10-year Treasury yield fell 11 basis points to 2.67 percent.
- Germany’s 10-year yield declined 12 basis points to 0.83%
- UK 10-year yield down nine basis points to 1.87%
Merchandise
- West Texas Intermediate crude fell 0.1% to $97.12 a barrel
- Gold futures rose 2 percent to $1,772 an ounce