US stocks rebounded for the second straight week as investors were convinced that the economy could withstand the intensifying war in Ukraine and the Federal Reserve’s plans to raise interest rates to curb inflation.
The S & P 500 rose 1.8% in a week, increasing the rate of increase in the last two weeks to 8.1%. This is the strongest move since late 2020. The technology-intensive Nasdaq Composite rose 2%, increasing its two-week rise to more than 10%. .. The Dow Jones Industrial Average rose 0.3% in a week.
Still, the new surge in bond yields has eased some of Friday’s stock market enthusiasm.
The major indices rose at the end of the day, after falling for most of the session, and ended mixed. The S & P 500 rose 22.9 points (0.5%) to 4543.06 and the Dow Jones Industrial Average rose 153.3 points (0.4%) to 34861.24. Nasdaq fell 0.2.54 points, or 0.2%, to 14169.3.
Forecasters have predicted that the Federal Reserve will raise interest rates faster than it currently predicts to curb inflation, which has remained at high levels for decades. Economists at banks such as Citigroup and Bank of America said this week that the central bank would raise interest rates by 0.5 percentage points at a time, in contrast to this month’s rise in quarterly points.
Such forecasts have shocked the government bond market. Benchmark 10-year Treasury yields jumped from 2.340% on Thursday to 2.491%, the highest level in almost three years.
As a sign that investors are raising interest rate expectations, yields on short-term and medium-term government bonds, which are most responsive to Fed policy, have risen above yields on long-term bonds.
Yields on 3-year bonds rose from 2.346% on Thursday to 2.536%. Yields on 5-year and 7-year bonds ended above 2.5%. This reflects rising expectations that the Fed may raise interest rates to 3% next year and then lower them later.
The US Treasury yield curve reversal has been seen as a warning sign of a recession for decades and seems to brighten again. WSJ’s Dion Rabouin explains why the reverse yield curve is so reliable in predicting a recession, and why market watchers are talking about it now.Illustration: Ryan Trefes
Some investors may be bold about the Fed’s aggressive efforts to raise rates, as the recent stock market recovery suggests investors are rushing to raise rates. It states.
Doug Ramsey, Chief Investment Officer of the Loithold Group, said:
At the same time, the war raised concerns about inflation and disruption in commodity supply. President Biden said the United States would respond if Russia used chemical weapons and called for Russia to be expelled from groups of 20 industrial and developing countries, adding to the fear of further escalation.
Fahad Kamal, Chief Investment Officer of Kleinwort Hambros, said: “The longer the conflict, the higher the positive side of inflation and the lower the negative side of growth. It is large and fundamentally uncertain.”
But more domestic-focused US companies may be protected from the worst war-related turmoil. Many of these companies continue to show solid profit prospects, according to Diane Jaffee, Senior Portfolio Manager at TCW.
The trader worked on the floor of the New York Stock Exchange on Monday.
Photo: Courtney Crow / Associated Press
“The earnings outlook has deteriorated slightly, but so far the revisions have been very modest,” she said.
Some of the biggest winners on Friday were regional banks. Comerica rose $ 3 (3.2%) to $ 97.04 and Zion’s Bancorp rose $ 2.50 (3.6%) to $ 71.08. Energy companies have also risen, with Coterra Energy rising $ 1.88 (7%) to $ 28.91.
According to a University of Michigan survey released Friday, consumer confidence in March was lower than economists expected. This indicator has fallen in recent months as consumers, especially low-income households, have a more pessimistic outlook for the economy.
Overseas, Pangea’s Stocks Europe 600 rose 0.1%. After the Moscow Stock Exchange partially reopened after a month of closure, Russian stocks fell 3.7% a day, reversing part of Wednesday’s 4.4% surge. Gazprom fell 12% and Sberbank, Russia’s largest creditor, fell 3.5%.
In Asia, the major benchmarks were mixed. Chinese stocks were under pressure as the US Watchdog said the delisting of US-listed Chinese stocks was still at the table. The Shanghai Composite Index fell 1.2% and the Hang Seng Index in Hong Kong fell 2.5%. Japan’s Nikkei 225 rose 0.1%.
— Sam Goldfarb contributed to this article.
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