U.S. stocks dip as inflation risk fans policy bets; USD pauses rally

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NEW YORK (Businesshala) – US stocks fell on Wednesday and two-year Treasury yields hit an 18-month high as data showed inflation was faster than expected in September, prompting policy tightening by the Federal Reserve. The condition is being confirmed.

FILE PHOTO: The offices of the London Stock Exchange Group can be seen in the City of London on December 29, 2017. Businesshala/Toby Melville

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, highlighting the challenges of strained supply chains. did.

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“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.

Worries that the end of the Fed’s ultra-lax monetary conditions will ease support for equities pulled on US stocks despite gains in technology stocks, and an encouraging earnings report from JPMorgan Chase & Co.

The largest US bank reported third-quarter earnings on Wednesday that beat estimates, thanks to record revenues in some investment banking business and a sunnier economic outlook, which allowed it to set aside money for potential loan losses. Gave permission. JPMorgan’s stock was down 2.4% as of noon.

The Dow Jones Industrial Average fell 0.25%, the S&P 500 was down 0.02%, while the Nasdaq Composite fell 0.37%.

The pan-European STOXX 600 index gained 0.70% and MSCI’s worldwide shares gained 0.30%.

Bets on tighter monetary policy flattened the US yield curve.

The two-year Treasury yield jumped to 0.394%, the last seen since March 2020, before dropping to 0.36%. The benchmark 10-year yield declined to 1.5525% 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.

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 94.126 from the previous day’s one-year high of 94.563. A softer dollar helped the euro jump 0.45% from a nearly 15-month low to $1.15815.

The Japanese yen, which was at a three-year low against the dollar, also rose 0.18% to 113.38 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.

However, analysts at JPMorgan argued on Wednesday that concerns about accelerating economic growth, and consequent stagnation, were “excessive” in inflation.

“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.

US crude was down 0.14% at $80.53 a barrel and Brent was down 0.22% at $83.24 a barrel.

Usually seen as a hedge against inflation, gold shone.

Spot gold rose 1.9% to $1,793.97 an ounce. US gold futures rose 1.98% to $1,793.10 an ounce.

Additional reporting by Alun John in Hong Kong and Sujatha Rao in London; Editing by Jonathan Otis and Nick Ziminsky

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