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US stocks rebound on economic optimism; Dollar pauses rally

  • US stocks rise on general economic optimism
  • Oil is falling from Monday’s multi-year highs
  • Dollar declines from Tuesday’s year-old high
  • The yields on two-year government bonds are rising and the yield curve is flattening out

NEW YORK, Oct 13 (Reuters) – Wall Street rose in troubled trading Wednesday as investors saw an impending end to ultra-loose US monetary policy as a vote of confidence in the economy, while the yields of two US Treasuries entered an 18-month period -Highly scored on bets that a tightening of the policy is imminent.

Indeed, the Federal Reserve signaled on Wednesday that it could begin scaling back its support for the US economy from the time of crisis – which this year will grow as fast as it has been for decades – by the middle of next month, with numbers growing Policy makers are concerned that high inflation may last longer than previously thought. Continue reading

General optimism about economic growth helped the S&P 500 (.SPX) reverse the losses at the end of the day and gain 0.30%, while the Nasdaq Composite (.IXIC) rose 0.73% and the Dow Jones Industrial Average ( .DJI) ended flat.

The pan-European STOXX 600 Index (.STOXX) gained 0.70% and MSCI’s global share index (.MIWD00000PUS) rose 0.48%.

Earlier figures had shown the U.S. consumer price index rose 0.4% last month, higher than an expected 0.3%, as Americans paid more for groceries, rent and a range of other goods, highlighting the challenges of strained supply chains. Continue reading

While some investors feared accelerated inflation, compounded by rising oil prices, could slow economic growth and lead to stagnation, leading to “stagflation”, analysts at JPMorgan argued on Wednesday that such fears were “exaggerated” be.

“Persistent inflation suggests we are staying in a hot economy, which could prompt the Fed to act earlier,” Bank of America analysts said in a press release.

“Historically, stock markets have done well during times of oil price rises, especially during times that followed a crisis,” the analysts said. They recommended that investors put more cash in stocks in the energy, materials, industrial and financial sectors compared to other investments.

Bets on a tighter monetary policy flattened the US yield curve.

Two-year government bond yields jumped to 0.394%, a level last seen in March 2020 before falling to 0.36%. The benchmark 10-year yield fell to 1.5403% from 1.58% late Tuesday.

The spread between 10-year and two-year Treasury yields was around 118 basis points, the lowest in over two weeks.

A flatter yield curve weighs on banks’ profitability and weighs on bank stocks.

JPMorgan Chase & Co (JPM.N) stocks fell 2.6% for the day, although third-quarter earnings were better than expected. Continue reading

The dollar, which has benefited from betting that tighter US monetary policy would improve its attractiveness as a higher-yielding currency, took a breather on Wednesday.

The dollar index fell 0.42% to 94.033 from a year-long high of 94.563 the previous day. A softer dollar helped the euro jump 0.56% from a nearly 15-month low to $ 1.15945.

The Japanese yen, held at a three-year low against the dollar, also rebounded, rising 0.23% to 113.27 per dollar.

Oil prices, which had fallen sharply, also halted their rally as some investors questioned whether inflation and other supply chain issues will dampen economic growth and ultimately energy demand.

US crude fell 0.15% to $ 80.52 a barrel and Brent was at $ 83.27, down 0.18% from the day.

Gold, usually viewed as an inflation hedge, shone as a softer dollar added to its strength.

Spot gold rose 1.9% to $ 1,792.91 an ounce. US gold futures rose 1.92% to $ 1,792.00 an ounce.

Additional coverage from Alun John in Hong Kong and Sujata Rao in London; Editing by Nick Zieminski and Rosalba O’Brien

Our Standards: The Thomson Reuters Trust Principles.

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