NEW YORK (Businesshala) – Wall Street rose in choppy trade on Wednesday as investors saw an imminent end to ultra-lax US monetary policy in the form of a confidence vote in the economy, while two-year Treasury yields remained at stake for 18 months. reached a high level. The policy is being tightened.
Indeed, the Federal Reserve indicated on Wednesday that it may begin easing its crisis-era support for the US economy – which is set to grow at its fastest pace in decades this year – by the middle of next month. , with a growing number of policy makers concerned that high inflation could last longer than previously thought.
General optimism about economic growth helped the S&P 500 recover 0.30% from losses late in the day, while the Nasdaq Composite jumped 0.73% and the Dow Jones Industrial Average ended flat.
The pan-European STOXX 600 index gained 0.70% and MSCI’s worldwide shares gained 0.48%.
Earlier data showed the US consumer price index rose 0.4% last month, higher than expected 0.3%, as Americans overpaid for food, rent and a range of other goods, and the challenges of strained supply chains. exposed.
While some investors have worried that rising inflation from rising oil prices could slow economic growth and stagnate it, leading to ‘stagflation’, analysts at JPMorgan argued on Wednesday that this could slow economic growth. Such fears were “exaggerated”.
“Persistent inflation suggests we remain in a warming economy, which could prompt the Fed to move on too soon,” Bank of America analysts said in a note.
“Historically, equity markets have performed well in periods of rising oil prices, particularly in the post-crisis periods,” said analysts. He recommended that investors allocate more cash to stocks in the energy, materials, industrial and financial sectors relative to other investments.
Tighter monetary policy bets flattened the US yield curve.
The two-year Treasury yield jumped to 0.394%, which was last seen in March 2020 before declining 0.36%. The benchmark 10-year yield declined to 1.5403% from 1.58% late Tuesday.
This left a spread of about 118 basis points between the 10-year and two-year Treasury yields, the lowest in two weeks.
A flatter yield curve lowers the profitability of banks and is weighted on bank stocks.
Shares of JPMorgan Chase & Co fell 2.6% for the day, despite better-than-expected third-quarter earnings.
The dollar, which has benefited from a bet that tighter US monetary policy would burnish its appeal as a high-yield currency, took a breather on Wednesday.
The dollar index fell 0.42% to 94.033 from the previous day’s one-year high of 94.563. A softer dollar helped the euro jump 0.56% from a nearly 15-month low to $1.15945.
The Japanese yen, which was at a three-year low against the dollar, also rose 0.23% to 113.27 per dollar.
Oil prices, which are on a tear, also halted their rally, as some investors questioned whether inflation and other supply chain issues would dampen economic growth and ultimately energy demand.
US crude was down 0.15% at $80.52 a barrel and Brent at $83.27, down 0.18% on the day.
Gold, generally seen as a hedge against inflation, added to its strength as a soft dollar.
Spot gold rose 1.9% to $1,792.91 an ounce. US gold futures rose 1.92% to $1,792.00 an ounce.