Banks lift stocks, US yields climb after data
New York — Stocks on major world markets rose further on Wednesday and US Treasury yields rose after a batch of US economic data increased the possibility of an interest rate rise by the Federal Reserve.
US retail sales rose more than expected in January, while other data showed consumer prices recorded their biggest increase in nearly four years last month and manufacturing output steadily rising.
The reports come on the back of comments from US Fed Chair Janet Yellen on Tuesday that the central bank would probably need to raise rates at one of the upcoming meetings.
The economic data and Yellen’s comments heightened expectations of a March interest rate hike, with US short-term interest rates futures implying a 27% chance of a 25 basis point rise at its March meeting.
"It makes it more interesting, March, for sure," said Brian Rehling, co-head of global fixed income strategy for Wells Fargo Investment Institute in St. Louis.
"There is a chance more so than when she started speaking, but just to the extent that she kept it in play rather than saying it is coming in March." The prospect of higher rates pushed US financial stocks 0.5% higher on Wall Street for their fifth straight day and lifted the benchmark S&P 500 index slightly higher to another record.
The Dow Jones Industrial Average rose 80.19 points, or 0.39%, to 20,584.6, the S&P 500 gained 4.38 points, or 0.19%, to 2,341.96 and the Nasdaq Composite added 15.89 points, or 0.27%, to 5,798.46.
MSCI’s benchmark global equity index rose 0.48% to 442.26 points, less than a point off its intraday record of 443.75.
Europe’s index of leading 300 stocks rose nearly 1 percent earlier to its highest since December 2015, buoyed by bank earnings, but had given up some gains to trade up 0.5 percent.
Benchmark US Treasury yields rose to a two-and-a-half week high of 2.524% after the data and were last down 9/32 in price to yield 2.5022%. The US dollar reversed course after touching a one-month high in the wake of the US data and was last down 0.08% against a basket of major currencies. The greenback has advanced for eleven straight session before weakening on Wednesday.
Yellen testifies to the US Congress again on Wednesday, this time to the House of Representatives.
US crude was down 0.4% at $52.99 and Brent shed 0.4% to $55.73 a barrel after a bearish increase in US crude inventories to record highs.