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(Bloomberg) — In volatile trading after mixed economic reports and indications that the Federal Reserve is in no hurry to cut interest rates, although it could cut rates again this year. US bond yields rose.
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Bonds fell across the U.S. curve as data showed sustained inflation and weak retail sales. The Fed swap reduces the likelihood of policy easing in 2024, with rate cuts now likely to begin in July. There was less confidence in the stock market as the S&P 500 Index erased its gains.
The producer price index rose by the most in six months after consumer price data earlier this week showed rising cost pressures. After a sharp decline at the start of the year, U.S. retail sales grew less than expected, highlighting concerns about the sustainability of consumer spending.
“Well, it’s a pickle,” says Chris Roe of FHN Financial. “On the heels of a second strong CPI and just a week before the Fed meeting, February PPI is rising twice as fast as expected, while retail sales are not completely weak. So far, it has been “so-so” to say the least. ”
The yield on US two-year bonds rose 5 basis points to 4.68%. The S&P 500 index is hovering around 5,160. The dollar rose.
Other comments on economic data:
This round of economic updates provided no new information ahead of next week’s Fed meeting. One observation we would add is that the pace of retail sales in the first quarter suggests signs of stagflation. However, this is only two prints, not enough to draw broad conclusions.
In some ways, today was a microcosm of the past month, with persistent inflation coupled with signs of softening in other parts of the economy. The question now is whether traders will reconsider how quickly the Fed will cut rates, and whether that will slow stock market gains in any meaningful way. So far, markets have ignored concerns about stubborn inflation and a cautious Fed.
Bottom line: Consumers have a little more spending power, but consistent downward revisions should indicate the economy is slowing.
This may be a case of “bad news is good news.” The Fed wants to get over inflation, but it is unlikely to do so by sending the U.S. economy into recession all at once. The Fed has already said it will cut rates, but it’s just a matter of when. June remains the most likely candidate for the first rate cut.
February’s Producer Price Index report suggests the tailwind of “temporary” inflation exiting the U.S. economy is over, with input prices now set to ease as the Fed lowers inflation to 2%. There is no doubt that this is a neutral factor in guiding the market, but there is a risk that it will become a headwind at the end of the year. If the initial commodity rally regains some momentum, it will be in 2024.
Although we expect that a smooth transition to 2% inflation will continue to be difficult and that service prices within the CPI will further decelerate due to rent control, prices may bottom out, particularly due to: There is a gender. There are early signs of rising commodity prices and restocking.
Company highlights:
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President Joe Biden has called for Nippon Steel to maintain U.S. ownership in its move to buy Pittsburgh-based United States Steel.
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Dollar General Corp.’s same-store sales outlook beat Wall Street expectations, showing that its turnaround efforts are beginning to bear fruit.
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Dick’s Sporting Goods Co. reported sales that beat analysts’ expectations, driven by strong demand for sporting goods.
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BNP Paribas has cut bonuses across its investment banking division following a weak year in deals and trading.
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Saudi Arabia is in talks to add prominent Wall Street banks to its secondary stake sale in oil giant Aramco, according to people familiar with the matter.
This week’s main events:
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Chinese real estate prices Friday
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Japan’s largest trade union federation announces results of annual wage negotiations on Friday ahead of Bank of Japan policy meeting
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Bank of England releases inflation survey on Friday
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US Industrial Production, University of Michigan Consumer Sentiment, Empire Manufacturing, Friday
The main movements in the market are:
stock
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As of 9:48 a.m. New York time, the S&P 500 was down 0.1%.
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Nasdaq 100 almost unchanged
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The Dow Jones Industrial Average is little changed.
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Stoxx Europe 600 has little change
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MSCI World Index falls 0.1%
currency
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Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.3% to $1.0912.
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The British pound fell 0.2% to $1.2771.
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The Japanese yen fell 0.2% to 148.12 yen to the dollar.
cryptocurrency
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Bitcoin fell 1.8% to $71,832.01.
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Ether fell 2.8% to $3,879.1.
bond
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The 10-year Treasury yield rose 8 basis points to 4.27%.
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Germany’s 10-year bond yield rose 4 basis points to 2.41%.
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The UK 10-year bond yield rose 4 basis points to 4.06%.
merchandise
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West Texas Intermediate crude rose 1.2% to $80.64 per barrel.
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Spot gold fell 0.7% to $2,159.42 an ounce.
This article was produced in partnership with Bloomberg Automation.
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