Treasury sell-off on Tuesday deepened, resulting in U.S. stocks climbing up after the Chairman of Federal Reserve Jerome Powell signaled more aggressive steps from the central bank to control inflation.
U.S. equities gained over 1%
Nasdaq 100 and S&P 500 gained over 1% on Tuesday, adding to the late rebound on Monday following the comments from Powel. As bonds yields continued to rise, the short-dated treasuries moved towards their worst performance in a quarter in nearly four decades.
Traders braced themselves for high volatility amidst gains until there was some stability on the inflation, Fed policy, and War in Ukraine.
The chief market technician at Piper Sandler & Co, Craig Johnson, said that the S&P reversal after a recent downtrend indicates that the U.S. stocks have bottomed out. The momentum indicators remain bullish, and technical shows that correction lows are likely set.
The war has disrupted the commodity market, and there is pressure on central banks to tighten the monetary policy. Powell has indicated that he is willing to increase rates precisely by 50 basis points in the following policy meeting if it is needed.
Hungary and Germany put brakes on the sanction on Russian oil, resulting in a fall in crude oil prices in New York after Brent futures saw an unstable session.
The Federal Reserve hiked interest rates by a quarter-point in the previous week and hinted at six more such hikes this year. This year, derivative Traders anticipate a 7.5 quarter-point interest rate hike in the remaining six policy announcements.
Until the investors get a confirmed idea of the interest rates hikes for the remaining part of the year, the uncertainty of the Federal Reserve will continue to affect the stocks. According to a former Merrill Lynch Trader, Tom Essaye, who founded the newsletter “The Sevens Report,” expects the yield curve to compress further towards an inversion and add to headwinds on the stocks.
Stocks on the European market gained, led by cyclical stocks like auto manufacturers and banking stocks. The dollar pared against peer advance, and Bitcoin gained around 4% to register the highest gains in nearly three weeks.
Some key events lined up for the week.
- Christine Lagarde, president of Central Bank Europe, to speak at BIS innovation summit on March 23
- EIA crude oil report on inventory on March 23
- Federal Reserve Chair Powel and Governor of Bank of England, Andrew Baily to speak at BIS summit on March 23
- Rishi Sunak, Chancellor in the U.K., statement on budget on Wednesday.
- U.S President Biden to attend an emergency summit meeting of NATO in Brussels on March 24.
- U.S. report on durable goods and jobless claims on March 24.
Some major moves in the markets:
- Nasdaq 100 and S&P 500 rose by 1.7% and 1.1 % respectively
- Bloomberg Dollar Spot Index remained unchanged
- 10-year Treasuries yield increased by eight basis points to 2.37%
- Crude oil in West Texas Intermediate fell to $109.90 a barrel.
