(Bloomberg) — Stocks fell while Treasury yields rose after solid economic reports strengthened the case that the Federal Reserve should keep interest rates higher for longer.
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The S&P 500 pared gains, led by losses in its most influential group – technology. Nvidia Corp. slumped as the U.S. restricts sales of chips the company developed for the Chinese market. Goldman Sachs Group Inc. fell on a 33% drop in earnings. Bank of America Corp. rose after traders reported their best third-quarter results in more than a decade.
The two-year U.S. Treasury yield hit its highest level since 2006, while the 10-year yield rose 12 basis points to 4.83%. Swap contracts tied to the Fed’s rate decisions showed traders were pricing in a more than 60% chance that policymakers will raise interest rates by another quarter of a percentage point in January after holding steady in November. A move in December is considered possible, but less likely than in January.
“Good news about the economy is once again bad news as it will deter policymakers from further tightening,” said Edward Moya, senior market analyst for the Americas at Oanda. “It appears the U.S. economy is not yet ready to enter a recession.”
Retail sales beat forecasts and industrial production rose last month, providing new evidence of a resilient American consumer whose spending is helping to stabilize output. The reports prompted a range of economists, from Goldman Sachs to JPMorgan Chase & Co. to Morgan Stanley, to raise their forecasts for third-quarter gross domestic product.
Thomas Barkin, president of the Fed Bank of Richmond, said policymakers have “time” to figure out whether they can keep interest rates stable or whether they need to raise them further to keep inflation down to the policy’s 2 percent target to bring decision makers.
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Read: A regional Fed board wanted to raise the discount rate in September
Traders were also closely watching recent geopolitical events: President Joe Biden will travel to Israel on Wednesday in a show of solidarity following the attack by Hamas – which is designated a terrorist organization by the United States and the European Union. The Israeli military attacked the south of the Gaza Strip after ordering people to seek refuge there.
The Bank of Israel stressed the urgency of stabilizing the shekel after it fell to eight-year lows, reversing expectations among traders who are betting on a sharp interest rate cut as soon as next week.
Elsewhere, the Bank of Japan is expected to discuss raising its inflation forecast for fiscal 2023 and 2024 at its monetary policy meeting later this month, extending the period over which prices meet or exceed their 2% target, the bank said of Japan familiar people subject. The yen briefly rose following news of central banks’ price outlook.
Company highlights
US Bancorp rose sharply after the Fed released it from its obligation to meet requirements for larger banks by the end of next year.
The Bank of New York Mellon Corp. reported earnings that beat estimates as higher interest rates boosted the company’s revenue.
Johnson & Johnson raised its 2023 sales forecast as some older drugs beat sales estimates, including its best-seller Stelara, which will face generic competition next year.
Wyndham Hotels & Resorts Inc. called Choice Hotels International Inc.’s takeover bid “disappointing” and rejected an offer that would create a dominant player in the budget hotel space.
Dollar Tree Inc. rose as Goldman Sachs raised its buy rating on the retailer from neutral due to its strong earnings growth potential.
Important events this week:
Reserve Bank of Australia Governor Michele Bullock speaks on Wednesday
China’s GDP, retail sales, industrial production, Wednesday
UK CPI, Wednesday
Eurozone CPI, Wednesday
Morgan Stanley, Netflix, Tesla earnings, Wednesday
The Federal Reserve will release an economic survey in the Beige Book on Wednesday
Philadelphia Fed President Patrick Harker and New York Fed President John Williams will speak at separate events on Wednesday
Unemployment in Australia, Thursday
Japan trading, Thursday
Property prices in China, Thursday
US initial jobless claims, existing home sales, benchmark index, Thursday
Federal Reserve Chairman Jerome Powell, Chicago Fed President Austan Goolsbee, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Patrick Harker and Dallas Fed President Lorie Logan speak on Thursday various events
Japanese CPI, Friday
Key interest rates for Chinese loans, Friday
Philadelphia Fed President Patrick Harker speaks Friday
Some of the key moves in the markets:
Shares
The S&P 500 fell 0.2% as of 3:25 p.m. New York time
The Nasdaq 100 fell 0.5%
The Dow Jones Industrial Average fell 0.1%
The MSCI World Index has hardly changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2% to $1.0579
The British pound fell 0.2% to $1.2187
The Japanese yen fell 0.1% to 149.73 per dollar
Cryptocurrencies
Bitcoin rose 0.2% to $28,461.12
Ether fell 1.8% to $1,559.84
Tie up
The 10-year Treasury yield rose 12 basis points to 4.83%
The 10-year German government bond yield rose 10 basis points to 2.88%
The 10-year UK government bond yield rose three basis points to 4.51%
raw materials
West Texas Intermediate crude rose 0.5% to $87.08 a barrel
Gold futures rose 0.2% to $1,937.50 an ounce
This story was produced with support from Bloomberg Automation.
– With assistance from Emily Graffeo.
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