December 10, 2022

Investors watched the rise in pet interest rates as the dollar rose and stocks mixed

Image of the US Federal Reserve building in Washington on March 18, 2008. REUTERS / Jason Reid / File photo

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WASHINGTON, Jan. 27 (Reuters) – U.S. stocks painted a mixed picture on Thursday as investors digested how strong economic news could suggest the Federal Reserve’s interest rate hike.

After a solid start, the stock retreated at noon with the tech-heavy Nasdaq mix. (.IXIC) And S&P 500 (.SPX) Decreases by 0.65% and 0.16%, respectively.

Dow Jones Industrial Average (.DJI) Increased by 0.12%. MSCI Global Equity Code (.MIWD00000PUS)Shares of 45 countries traded down 0.48%.

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Markets opened with optimism on Thursday morning on the latest data showing that the US economy grew by 6.9% in the fourth quarter – the fastest growth since 1984. But profits plummeted as investors implemented how the central bank could reflect strong economic growth. Jerome Powell told a news conference on Wednesday that the central bank’s primary concern was inflation.

“This is good news for the health of the US economy, but it also strengthens the case for the Federal Reserve’s policy of aggression,” said David Madden, market analyst at Equity Capital. “Despite the strong GDP reading, US stocks are higher, which could be an indication that dealers are using the idea of ​​a four- or five-point increase this year.”

The dollar is rising

The possibility of rapid or large US interest rate hikes helped push the dollar to its highest level since July 2020.

In its latest policy update on Wednesday, the central bank reiterated plans to end its epidemic-period bond purchases that month before beginning a significant reduction in its assets, as widely expected, to raise rates in March. read more

Fed Fund Futures showed a five percent increase in trades in December, after fully setting prices for the previous four. FEDWATCH

The dollar index, which measures the value of the greenback against other major currencies, rose 0.8%, its biggest single-day gain in more than two months. read more

Expectations of a Fed tightening sent the policy-sensitive US two-year yield to an intraday high of 1.208%, which last reached in February 2020. The two-year yield was slightly lower at 1.1683% in the afternoon trade.

Benchmark 10-year yields fell to 1.7869% after rising to 1.88% on Wednesday.

Investors expect the pace of tightening of the central bank’s policy in the coming months to be a key determinant of risk perception, although how fast the bank rises will depend on economic data and especially inflation.

“Our new fundamental case for six hikes this year poses challenges to our positive outlook on US stocks. However, if earnings growth is strong, it will not be enough to track it separately,” BNP Paribas analysts wrote. Note.

Oil prices fell slightly as the day progressed after tensions between Russia and Ukraine escalated to a seven-year high.

The United States said on Wednesday that Russia had held security talks with Western countries and intensified its military build-up near Ukraine, paving the way for a broader Russian response to Eastern Russia’s demands. read more

Brent crude was down 0.59% at $ 89.43 a barrel. US crude was down 0.7% at $ 86.74 a barrel.

Spot gold fell 1.36% to $ 1,793 an ounce at $ 1,853 earlier in the week.

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Editing by Robert Brussel, Catherine Evans and Jonathan Odyssey

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