(Bloomberg) – Treasury yields soared after data showed US economic strength bolstered speculation that the Federal Reserve will have scope to hike interest rates twice more this year.
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Bonds fell along the curve, with 2-year yields rising 16 basis points to 4.87%. Swap markets are pointing to a 50% chance of a second Fed rate hike by the end of the year. The dollar recouped losses. The S&P 500 fluctuated and the stock market is likely to become even more unstable as traders adjust their positions late in the quarter.
US jobless claims fell the sharpest since October 2021 in a week that also included the June 19 holiday. Separate data showed that first-quarter gross domestic product was revised up sharply to a 2% annual increase. Meanwhile, key inflation indicators closely monitored by the Fed were revised slightly lower.
“The market is taking both positives and negatives from recent strength in economic data as solid economic data means the economy is more resilient but also encourages the Federal Reserve to continue raising interest rates,” said Carol Schleif, chief of the Federal Reserve’s investment officer at BMO Family Office.
Fed Bank of Atlanta President Raphael Bostic said he was in favor of putting borrowing costs on hold, but Chairman Jerome Powell and other colleagues disagree. Powell is signaling interest in a rate hike after telling a conference in Madrid just hours earlier that action is not “off the table” at back-to-back policy sessions.
In corporate news, Bank of America Corp. and Wells Fargo & Co. drove gains in financials as the largest US lenders passed the Fed’s stress test and cleared the way for payouts. Netflix Inc. rose as Citigroup Inc. raised its price target.
The story goes on
Important events this week:
China Manufacturing PMI, Non-manufacturing PMI, Balance of Payments, Friday
US Personal Income and Expenditure, Consumer Sentiment at University of Michigan, Friday
Some of the key movements in the markets:
Shares
The S&P 500 was little changed at 9:31 a.m. New York time
The Nasdaq 100 has barely changed
The Dow Jones Industrial Average has barely changed
The Stoxx Europe 600 has hardly changed
The MSCI World Index fell 0.2%
currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.4% to $1.0873
The British pound fell 0.3% to $1.2603
The Japanese yen fell 0.2% to 144.79 per dollar
cryptocurrencies
Bitcoin surged 2% to $30,701.65
Ether is up 2% to $1,867.35
Bind
The 10-year government bond yield rose 12 basis points to 3.83%
The 10-year German government bond yield rose eight basis points to 2.39%
The 10-year UK government bond yield rose six basis points to 4.38%
raw materials
West Texas Intermediate crude fell 0.1% to $69.48 a barrel
Gold futures fell 1.1% to $1,901.40 an ounce
This story was created with the support of Bloomberg Automation.
– Featuring Brett Miller, Sujata Rao, John Viljoen, Peyton Forte and Carly Wanna.
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