Equities were higher on Friday as rising bond yields eased pressure from Wall Street.
The Standard & Poor’s 500 was up 0.4% in early trading. It is on track to finish the week with a small gain, the first in four weeks, after finding some stability after a rapid rise and fall earlier this year.
The Dow Jones Industrial Average was up 74 points, or 0.2%, from 33,077 to 9:35 a.m. ET, while the Nasdaq Composite was up 0.5%.
Stronger moves may be ahead tomorrow morning as the latest data comes in showing just how strong the US services sectors have been over the past month.
The central guide to market movements lately has been where inflation is going and what the Federal Reserve is going to do about it. Earlier this year, Wall Street built on hopes that a slowdown in inflation would prompt the Fed to ease its rate hikes. Such increases can reduce inflation by slowing down the economy, but they also increase the risk of a later recession and depress investment prices.
The rally reversed last month after multiple economic reports came in warmer than expected. This included data on the labor market, consumer spending and inflation itself at various levels.
The strong data helped allay fears that a recession could be on the horizon, but also raised concerns about continued upward pressure on inflation. That forced Wall Street to abandon hope of rate cuts this year and raise its expectations for rate levels.
These expectations helped drive bond yields higher in February, with 10-year government bond yields reaching their highest level since November. It pulled back in Friday morning trading, easing some pressure. It fell from 4.06% to 3.99%.
The two-year interest rate, which is more in line with the Fed’s expectations, also fell. It dropped from 4.89% to 4.85%.
The next rate hike by the Fed is scheduled for later this month. Before then, reports on job market strength and inflation should heavily influence the market and expectations for Fed action.
Last month it scaled back the scope of its rate hikes, highlighting progress in the fight against inflation. It also hinted that only two more rate hikes were on the horizon. But the strong messages since then have led to concerns that the Fed could not only push through at least three more rate hikes, but also scale back the scope of the hikes.
All the worries came as corporate earnings expectations eased. High inflation and interest rates are still eating away at corporate profits. Retailers, in particular, said some of their customers were having problems.
Costco Wholesale on Friday reported stronger-than-expected revenue for its final quarter, but revenue fell short of forecasts. Their share fell by 3.7%.
On the upside was Hewlett Packard Enterprise, which rose 0.9% after reporting higher revenues and sales than Wall Street had expected.
Equity markets abroad were mostly higher.
Shares in Shanghai gained 0.5%. A central bank official said China’s huge real estate sector is recovering from a slump triggered by debt controls that have led to a wave of developer defaults and turmoil in global financial markets.
The Nikkei 225 in Tokyo rose 1.6% after unemployment fell in Japan in January.
AP writers Joe McDonald and Matt Ott contributed to this report.
Source: LA Times
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
