Bloomberg News reports that as the US stocks due to earnings from the corporate pouring in, the economic data came in was better than anticipated. The Treasuries dropped following hawkish comments from the officials of the Federal Reserve when they made it apparent that a policy pivot was not likely.
The earnings have set the stage for the stocks, with PayPal Holdings Inc. and Moderna Inc. displaying solid reports, raising the Nasdaq 100 index by as much as 2% and 1.1%, as shown by S&P 500. While the tech-heavy index escalated to the highest level in the last three months, the S&P 500 hit a level seen in June last. Data obtained recently also eased concerns of a wider economic slowdown, as growth in the service sector in the United States unexpectedly increased to a 3-month high in July.
The Treasury 10-year yield moved towards 2.8% as the swap markets displayed that traders are pricing in a 50% chance related to a 3-quarter percentage point hike in rate in September. The 10-year rate was plunging to 2.5% in anticipation that the hike in rate would not be bigger.
Bonds have continued to sell off as the investors have realigned their anticipations for the Fed’s pathway for the rate hike. There was the rallying of the Treasuries in the past week following Chair Jerome Powell’s signal that the pace of hikes in the future towards the latter part of the year may become slower, thereby fostering the odds for cuts in the market implied measures next year.
Bloomberg News reports that many Fed officials have revealed that the central bank is yet not done with tightening and continues to remain laser-focused on clamping down the price gains that are the hottest in forty years.
Pelosi and the Markets
There is a certain calmness in the markets after US-China tensions were simmering as Nancy Pelosi, House Speaker, left Taiwan. Her visit had triggered anger, and angry responses from China, and the markets were found to be on edge just before her arrival.
Fed Signals
The US stocks are up again following upheavals on Tuesday. As far as signals from the Fed are concerned, there were comments by James Bullard, Charles Evans, Mary Daly, and Loretta Mester that indicate that it is a challenging time under the backdrop of escalating costs of borrowing price pressures and slower economic growth.
Bloomberg News reports that Daly, Fed President of San Francisco, stated there is a long way to go for the Fed to attain price stability of about the 2% inflation target. At the same time, the counterpart of Cleveland commented that she wishes to see compelling evidence and see that month-to-month cost hikes are moderating.
