US stocks added to gains sparked by speculation that the Federal Reserve’s tightening cycle may be nearing its peak, while Meta Platform Inc.’s biggest surge since 2013 lifted tech-heavy indexes. Treasuries edged higher.
(Bloomberg) — US stocks added to gains sparked by speculation that the Federal Reserve’s tightening cycle may be nearing its peak, while Meta Platform Inc.’s biggest surge since 2013 lifted tech-heavy indexes. Treasuries edged higher.
The S&P 500 jumped more than 1%, while the Nasdaq 100’s advance topped 3%. Meta rallied 25% after sales beat expectations and the company said it will become leaner and more decisive. Risk assets got a boost late Wednesday when Jerome Powell said the central bank has made progress in its inflation battle even as labor-market data continues to show tightness that could add to wage pressures. The Labor Department releases its hiring report for January on Friday.
The risk-on mood that gripped Wall Street last month spread to more obscure parts of the market. Retail favorites from Carvana Inc. to AMC Entertainment Holdings Inc. rallied. Cathie Wood’s flagship exchange-traded fund, loaded with speculative tech names, is up more than 10% in two days after a torrid 28% surge last month.
The yield on 10-year German government bonds headed for its biggest one-day drop since 2011 as traders bet that the European Central Bank will slow the pace of interest-rate increases. The ECB boosted rates by 50 basis points Thursday and suggested another hike of that magnitude would follow.
Investors across the globe are cheering what they perceive as varying degrees of dovish tilts from central banks across the globe. Powell dodging a question about financial conditions easing recently fueled optimism among US investors who had been prepared for him to push back against the recent rally in risk assets. Euphoria intensified after the Bank of England raised rates by half a point but indicated that its tightening cycle is drawing to a close. And while the European Central Bank remained somewhat hawkish, traders were heartened when President Christine Lagarde acknowledged disinflation.
“After the Fed and Bank of England both hinted at being close to the peak in their cycles, today’s meeting suggests the ECB is comfortable that it is also close to the end of its monetary tightening,” said Steve Ryder, senior portfolio manager at Aviva Investors. “We believe this peak tightening backdrop will continue to reduce volatility in government bonds over the coming months and make for an attractive income opportunity.”
Meanwhile, positioning in US swaps markets assumes the Fed is getting closer to cutting rates as traders bet that economic conditions are likely to keep it from the additional rate increases that policy makers still anticipate.
“While the Fed slowed its pace of rate hikes, there is still plenty of uncertainty on the trajectory of inflation and how its tightening of monetary policy will affect economic growth and earnings this year,” said Brad Bernstein, a Philadelphia-based managing director at UBS Wealth Management.
However, investors will now shift their focus to big-tech earnings, he said.
“Guidance from big-tech earnings is likely to set the tone and direction of markets in the near-term,” he said.
Key events this week:
- Earnings Thursday include: Alphabet, Apple, Amazon, Qualcomm
- Eurozone S&P Global Eurozone Services PMI, PPI, Friday
- US unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.4% as of 11:23 a.m. New York time
- The Nasdaq 100 rose 3.2%
- The Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 rose 1.3%
- The MSCI World index rose 0.9%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.5% to $1.0932
- The British pound fell 0.7% to $1.2284
- The Japanese yen rose 0.5% to 128.32 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to $23,847.41
- Ether rose 2.8% to $1,680.36
Bonds
- The yield on 10-year Treasuries declined seven basis points to 3.35%
- Germany’s 10-year yield declined 22 basis points to 2.06%
- Britain’s 10-year yield declined 30 basis points to 3.01%
Commodities
- West Texas Intermediate crude fell 0.6% to $75.97 a barrel
- Gold futures fell 0.3% to $1,937.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Brett Miller.
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