On Tuesday morning, equities were higher and government bond yields little changed as investors braced for more unwelcome signs of stubborn inflation.
Futures on the S&P 500, which give investors a chance to bet on the index before the market opens, edged higher Tuesday morning. The index has been flat so far this month as cautious investors remain cautious on the outlook for the economy.
Crucial to investor sentiment is the pace of inflation and whether the US Federal Reserve will need to raise interest rates further to curb rising prices.
Tuesday’s data is expected to show that “progress on cutting inflation remains painfully slow,” according to Wells Fargo analysts, and that in turn “is likely to keep the Fed in a difficult position” as the central bank tries to slow the rate of inflation to balance the economy without plunging it into a more severe downturn.
Higher interest rates have already started to hurt corporate profitability, and further rate hikes are likely to weigh on the stock market, according to strategists at Citibank, “particularly amid rising recession concerns.”
Prices in interest rate futures markets, which allow investors to bet on where interest rates are going, show that expectations are already leaning towards a quarter-point hike by the Fed in May.
Ahead of the latest inflation data, the two-year government bond yield, which is sensitive to interest rate expectations, rose to 4.06 percent from around 3.8 percent a week ago.
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