US equities traded higher Thursday, as the latest readings on jobs and factory-gate inflation were slightly softer than expected, a boost for those hoping the Federal Reserve may be approaching the end point of an era of aggressive interest rate hikes.
(Bloomberg) — US equities traded higher Thursday, as the latest readings on jobs and factory-gate inflation were slightly softer than expected, a boost for those hoping the Federal Reserve may be approaching the end point of an era of aggressive interest rate hikes.
The S&P 500 rose 0.3% while the more rate-sensitive Nasdaq 100 gained 0.9% after US jobless claims for the week ended April 8 rose to 239,000, compared to estimates of 235,000. Meanwhile, producer prices came in at 2.7% year-on-year, versus 3% that had been expected.
Treasury yields nudged lower with the two-year falling to 3.91%. The dollar lost more ground against a basket of currencies, with the euro/dollar exchange rate at a one-year high.
“For a Fed already inclined to pause, this report tips the scale just a bit more in favor, especially after yesterday’s CPI failed to reveal any new inflationary problems,” Christopher Low of FHN Financial said. “The link between the PPI and CPI is not as clear as it once was, but persistently small increases — or, as in March, an outright decline — will eventually come through to consumers.”
This week’s consumer inflation report showed a fall in year-on-year headline figures but a rise in core prices. The data also followed last week’s March payrolls, which rose at a firm pace with the unemployment rate dropping again near record lows. All that has left swaps markets still favoring a quarter-point hike by the Federal Reserve in May, though traders added to wagers that the Fed will cut interest rates by year-end at a faster pace than anticipated earlier in the week.
Read more: Traders Boost Bets on US Rate Cuts This Year After CPI
Minutes of the Fed’s March meeting published Wednesday showed policymakers scaled back expectations for rate hikes this year after a series of bank collapses roiled markets, and stressed they would remain vigilant for the potential of a credit crunch to further slow the economy. Officials forecast a “mild recession” starting later this year given their “assessment of the potential economic effects of the recent banking-sector developments.”
“Yes, they talked about recession, but they talked about the mild recessions. So no hard recession so far coming from these SVB fallouts,” Charles-Henry Monchau, chief investment officer at Syz Group, told Bloomberg Television, referring to the turmoil triggered by Silicon Valley Bank’s collapse.
Europe’s equity benchmark posted a modest gain as European Central Bank’s Governing Council member Francois Villeroy de Galhau spurred hopes for a dovish policy tilt. Oil dipped, gold gained and Bitcoin traded around $30,000.
Key events this week:
- US retail sales, business inventories, industrial production, University of Michigan consumer sentiment, Friday
- Major US banks JPMorgan Chase, Wells Fargo and Citigroup report earnings, Friday
Some of the main market moves:
Stocks
- The S&P 500 rose 0.3% as of 9:32 a.m. New York time
- The Nasdaq 100 rose 0.7%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.6% to $1.1057
- The British pound rose 0.4% to $1.2531
- The Japanese yen rose 0.6% to 132.38 per dollar
Cryptocurrencies
- Bitcoin rose 1% to $30,280.3
- Ether rose 5% to $2,003.36
Bonds
- The yield on 10-year Treasuries was little changed at 3.39%
- Germany’s 10-year yield declined one basis point to 2.36%
- Britain’s 10-year yield declined two basis points to 3.55%
Commodities
- West Texas Intermediate crude fell 0.3% to $83.01 a barrel
- Gold futures rose 1.5% to $2,055.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Mark Cranfield, Jeanny Yu and Tassia Sipahutar.
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