Oct 21, 2022
VOT Research Desk
Market Insights, Considerations & Analytics
Fed’s Harper issues a warning that rate increases will persist “for a time” Treasury yields are still increasing.
lowest level of the yen versus the dollar as of 1990
U.S. equities closed the afternoon lower, and benchmark Treasury rates continued to climb on Thursday as investors evaluated largely upbeat earnings against the likelihood that the Federal Reserve would stick with its hawkish strategy for longer than they had planned.
After remarks from Philadelphia Federal Reserve President Patrick Harker suggesting the central bank will “keep raising rates for a while,” all three major U.S. stock indexes reversed an earlier rally and turned red. Additionally, Harker’s remarks contributed to the 10-year Treasury yield’s rise above 14-year highs.
The move today is par for the course. We’ve seen wild U-turns so far this October. Harper’s remarks added to the evidence that the Fed is fully committed to maintaining its aggressive policy and increasing interest rates in the future.
According to CME’s FedWatch tool, financial markets have fully priced in yet another 75 basis point interest rate hike from the Federal Reserve when it meets next month.
The Fed’s aggressive campaign of interest rate hikes has so far had little effect on the tight U.S. labor market, despite a string of mixed quarterly corporate results and economic indicators indicating a slowdown.
Overall, earnings have been positive,” and he added, “still suggesting we are likely not in a recession and the economy is still moving forward, just a little slower than we’d like” throughout the reporting season thus far.
The S&P 500 lost 29.38 points, or 0.80%, to 3,665.78, the Nasdaq Composite lost 65.66 points, or 0.61 percent, to 10,614.84, and the Dow Jones Industrial Average lost 90.22 points, or 0.3 percent, to 30,333.59.
After British Prime Minister Liz Truss announced that she would resign next week, European stocks closed higher. This marked the end of a brief six-week term marked by turmoil brought on by a poorly received economic policy.
MSCI’s global stock index lost 0.56 percent while the pan-European STOXX 600 index gained 0.26 percent.
Stocks in emerging markets lost 0.23%.In contrast to Japan’s Nikkei, MSCI’s broadest index of Asia-Pacific shares outside of Japan lost 0.68 percent at the close.
After economic data appeared to indicate that the Federal Reserve is unlikely to halt its aggressive campaign to control inflation, benchmark Treasury yields resumed their upward trend.
The price of benchmark 10-year notes dropped 25/32 to yield 4.2346 percent, down from 4.129 percent late on Wednesday.
The 30-year bond’s price dropped 49/32 to 4.231 percent, from 4.127 percent late on Wednesday.
As sterling gained, the dollar was nominally lower against a basket of foreign currencies.
The yen briefly exceeded the 150-per-dollar level for the first time since August 1990, putting market participants on alert for Japanese intervention.
The euro gained 0.1% to $0.9781, while the dollar index fell by 0.09 percent.
The Sterling was last seen trading at $1.1221, up 0.06% on the day, while the Japanese yen fell 0.18 percent to 150.18 per dollar.
The news that China is considering easing COVID restrictions counterbalanced signs of a tightening supply, resulting in nearly unchanged oil prices.
Brent settled at $92.38 per barrel, down 0.3 percent on the day, while U.S. crude gained 0.5 percent to $85.98 per barrel.
Gold: Rising Treasury yields brought the safe haven metal back to close to three-week lows, reversing early gains.
To $1,627.19 an ounce,
