In a recent market update, there has been a rebound in Treasuries, led by shorter maturities, and followed a selloff triggered by a reset in Federal Reserve rate-cut bets. The premium traders are paying to hedge a sustained rise in long-end yields has hit the most expensive level since October. Equities also gained in a choppy session.
Jeremy Straub at Coastal Wealth remarked, “Investors should expect continued volatility as the market sorts out the continued uncertainty over how the Federal Reserve will respond to the ongoing inflation situation.” Fed Bank of Chicago President Austan Goolsbee said slightly higher inflation data for a few months would still be consistent with a path back to the central bank’s 2% goal. Traders are now only fully pricing in three Fed rate cuts for this year, with around a 70% chance of a fourth reduction, in line with the US central bank’s forecast for three easing moves.
The S&P 500 hovered near 4,980, with Nvidia Corp. briefly overtaking Google’s parent Alphabet Inc.’s market capitalization, while Apple Inc. extended losses into a third day. Uber Technologies Inc. surged on plans to buy back shares, and Bristol Myers Squibb Co.’s bond sale was said to exceed $85 billion in demand. Two-year US yields fell 10 basis points to 4.56%, and Bitcoin topped $51,000.
Matt Maley at Miller Tabak Co. mentioned that the stock-market bounce is giving investors relief from Tuesday’s “scare.” He also noted that Treasury yields remain at or very near their recent highs.
The global debt index has dropped 3.5% this year, wiping out all of its gains since December 12, with slower-than-forecast UK inflation numbers for January offering some relief to Treasuries on Wednesday, lowering the US 10-year yield after Tuesday’s 14-basis-point surge.
Chris Senyek at Wolfe Research remarked, “For the overall market to experience an official correction, we believe investors will need to see additional evidence that the Fed won’t cut in line with expectations and/or the growth outlook is decelerating fast enough to spark recession fears.”
Solita Marcelli at UBS Global Wealth Management stated, “The ‘hot’ inflation data do not change our base case for a soft landing of slower growth, falling inflation, and 100bps of Fed rate cuts this year, likely starting in the second quarter.”
The reversal in bond yields on Wednesday also favored a rebound in big tech, the group that has powered the stock-market resurgence. From a technical perspective, Dan Wantrobski at Janney Montgomery Scott said there will possibly be further “choppy back-and-forth action” this week as more Fed officials are expected to chime in on inflation data ahead of the producer price index on Friday.
The S&P 500’s pivot point from Tuesday’s session is at a close watch level of 4,920, as a break below this threshold could trigger more selling pressures ahead. Corporate highlights and key events for the week are also being closely monitored.
This story has been produced with the assistance of Bloomberg Automation. The information has been stated as of 15th February 2024 at 03:30 AM IST. More stories are available on Bloomberg’s website.
