(Bloomberg) – Traders expect the U.S. Federal Reserve to show patience before deciding to cut interest rates this year, as Wall Street struggles with another mixed economic report.
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Yields rose across the U.S. curve as data showed consumer spending was stronger than expected even as the Fed's preferred measure of underlying inflation slowed to its lowest level in nearly three years. Policymakers have signaled that they want to see signs of a sustainable economic downturn before cutting borrowing costs, but the numbers only confirm the view that a March turnaround is still very difficult at this stage. Ta.
Investors have not given up bets on a rate cut in the first quarter, but they are still fully pricing in a rate cut in May. Of course, it all depends on the next few economic reports, and the impact of shipping disruptions is not yet clear. Wall Street will be waiting to hear how everything plays out on the balance of risk as Jerome Powell and his colleagues gather next week.
“There remains an expectation that the Fed will discuss 'when', not 'if', to begin a rate cutting cycle,” said Quincy Crosby of LPL Financial. “The Fed is likely to wait until May or June to begin cutting rates unless next month's collection of inflation-related data conclusively highlights a clear path to 2%.”
The yield on the two-year US Treasury note rose 6 basis points to 4.35%. The S&P 500 rose slightly after struggling to find direction. The gauge has risen for seven consecutive sessions and hovers around 4,900. The tech-heavy Nasdaq 100 underperformed as disappointing forecasts from Intel and KLA weighed on chip makers.
Other comments:
“The Fed's job is essentially done, and there are good arguments for lowering rates and reining in risks to the job market. Of course, the Fed will choose to be patient and wait for further evidence that inflation is on the way. But markets are seeing the evidence and are bracing for rate cuts in the coming months. How the latest PCE data will affect Chairman Jay Powell's comments on the balance of risk after next week's meeting. I'm interested in seeing what kind of impact it has.”
“The big picture is that strong economic growth won’t cause inflation, so the Fed doesn’t need to worry. We expect rate cuts in 2024 starting in May, and perhaps Four rate cuts of 25 basis points each will be considered.
“The inflation trajectory is improving, giving the Fed room to cut rates this year. But the Fed still has work to do and should not be tempted to declare 'mission accomplished.' do not have. Investors shouldn't be surprised if commodity inflation briefly picks up next month due to transportation disruptions. ”
“A soft landing seems increasingly evident. The big question now is how quickly Jerome Powell will normalize policy when there is no pressing need. As it fades, internal conversations at the Fed become more important.”
“The FOMC does not need inflation to reach 2% year-over-year in order to cut interest rates, but it will be cautious as a tight labor market and strong consumer growth could reignite inflationary pressures in the U.S. economy. right.”
“Given how much inflation has slowed in recent months, a rate cut following the Fed's March 20 decision is not out of the question. However, the Fed is likely to wait until the second quarter to begin cutting rates.”
“After weeks of better-than-expected economic and inflation data, the disinflation story is on track with Fed-recommended inflation metrics. This news may give stock market bulls some oomph.” “No, but the Fed will likely maintain its rate cuts through the second half of this year.”
“Today's coverage was essentially neutral for Treasury yields and the dollar, as inflation data was positive, but real spending growth was solid.”
“We do not expect the December data to materially change March rate cut odds ahead of the weekend, and will instead quickly capture market attention as next week’s supply announcements, FOMC decisions, and PCE report are digested. I'm going to keep an eye on the salary statistics that we get.''
“We view today's PCE and personal spending data as bullish for both the path to the Fed's 2% target and the stock market. We expect a rate cut in the May-June period.If employment and economic indicators soften slightly and inflation continues to decline rapidly, the possibility of a rate cut in March may increase. But that's still not our base scenario.”
Elsewhere, Bitcoin rises above $41,000 as outflows from the $20 billion Grayscale Bitcoin Trust slow, with strategists hoping to halt Bitcoin's two-week slump. said it could be useful. Lower U.S. inventories and the prospect of more stimulus from the Chinese government helped oil prices break out of the range they had been in for months, with oil prices posting their biggest weekly gain since October.
Company highlights:
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Spirit Airlines fell after JetBlue Airways said its $3.8 billion acquisition of the low-cost carrier could be scrapped within days.
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American Express said it remains committed to its long-term profit and revenue goals and that its 2024 profit forecast exceeds analyst expectations.
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Visa Inc. posted profits that exceeded Wall Street expectations as credit card spending increased on the back of strong economic growth in the United States.
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Salesforce will cut about 700 employees, accelerating a brutal cycle of technology layoffs in early 2024.
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T-Mobile US's results fell short of analysts' expectations, overshadowed by surprisingly strong growth in new mobile phone subscribers.
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Saudi Aramco, the world's largest oil company, continues to send tankers laden with crude oil and fuel through the southern Red Sea, where Houthi militants have threatened commercial ships for months in response to Israel's war in Gaza. ing.
The main movements in the market are:
stock
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As of 10:52 a.m. New York time, the S&P 500 was up 0.2%.
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Nasdaq 100 fell 0.1%
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The Dow Jones Industrial Average rose 0.4%.
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Stoxx European 600 rose 1.1%
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MSCI World Index rose 0.3%
currency
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The Bloomberg Dollar Spot Index fell 0.1%.
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The euro rose 0.1% to $1.0861.
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Sterling rose 0.1% to $1.2721.
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The Japanese yen fell 0.3% to 148.10 yen to the dollar.
cryptocurrency
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Bitcoin rose 3.4% to $41,271.13
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Ether rose 1.7% to $2,256.55
bond
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The 10-year Treasury yield rose 3 basis points to 4.15%.
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Germany's 10-year bond yield rose 2 basis points to 2.31%.
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UK 10-year bond yield remains unchanged at 3.98%
merchandise
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West Texas Intermediate crude oil fell 0.1% to $77.25 a barrel.
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Spot gold fell 0.2% to $2,017.35 an ounce.
This article was produced in partnership with Bloomberg Automation.
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