US stocks rise and dollar pares losses after CPI, Fed decision
S&P 500 and Nasdaq score session highs for the third consecutive day as markets digest the Fed’s statement
12 June 2024 - 22:37
byStephen Culp
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New York — The S&P 500 and the Nasdaq scored session highs for the third consecutive day on Wednesday and US treasury yields pared earlier declines as investors weighed a market-pleasing inflation report against lowered interest rate cut expectations.
The dollar shed some weakness after the US Federal Reserve concluded its two-day policy meeting by leaving interest rates unchanged, and released its accompanying policy statement and Summary of Economic Projections (SEP).
The S&P 500 and the Nasdaq ended sharply higher, while the blue-chip Dow turned slightly negative towards the end of the session.
The more-hawkish-than-expected SEP seemed to contradict the labour department’s closely watched CPI report released earlier in the day, which showed core prices growing at their slowest annual pace in over three years.
“It’s a little disappointing to see this continued hawkishness, especially on the same day where you get one of the softest inflation reports in probably a couple of years,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “The market is going to struggle a bit with how hawkish the Fed is in light of all of not only this morning’s data, but last week’s as well.”
In his press conference following the decision, Fed chair Jerome Powell acknowledged that inflation has eased but remains too high and rate cut expectations have been pushed out due to slower-than-expected progress in bringing price growth down to the central bank’s 2% goal.
“I think the main takeaway will be that the market was probably expecting the Fed to shift the dot plot from three cuts to two cuts,” Mayfield added. “Instead it was shifted from three cuts to one cut, which on margin is a hawkish surprise.”
Still, financial markets are pricing in a 61.5% likelihood of a 25-basis-point rate cut in September, up from 46.8% on Tuesday, according to CME's FedWatch tool.
The Dow Jones industrial average fell 35.21 points, or 0.09%, to 38,712.21, the S&P 500 gained 45.71 points, or 0.85%, to 5,421.03 and the Nasdaq Composite added 264.89 points, or 1.53%, to 17,608.44.
US treasury yields slid after the data, but retraced a bit after the SEP release. US benchmark 10-year treasury notes last rose to yield 4.3277%, from 4.402% late on Tuesday. The 30-year bond rose to yield 4.4846%, from 4.535% late on Tuesday.
The dollar pared its losses against a basket of world currencies after the central bank cut its 2024 rate-cut expectations.
The dollar index fell 0.46%, with the euro up 0.61% to $1.0804.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
US stocks rise and dollar pares losses after CPI, Fed decision
S&P 500 and Nasdaq score session highs for the third consecutive day as markets digest the Fed’s statement
New York — The S&P 500 and the Nasdaq scored session highs for the third consecutive day on Wednesday and US treasury yields pared earlier declines as investors weighed a market-pleasing inflation report against lowered interest rate cut expectations.
The dollar shed some weakness after the US Federal Reserve concluded its two-day policy meeting by leaving interest rates unchanged, and released its accompanying policy statement and Summary of Economic Projections (SEP).
The S&P 500 and the Nasdaq ended sharply higher, while the blue-chip Dow turned slightly negative towards the end of the session.
The more-hawkish-than-expected SEP seemed to contradict the labour department’s closely watched CPI report released earlier in the day, which showed core prices growing at their slowest annual pace in over three years.
“It’s a little disappointing to see this continued hawkishness, especially on the same day where you get one of the softest inflation reports in probably a couple of years,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “The market is going to struggle a bit with how hawkish the Fed is in light of all of not only this morning’s data, but last week’s as well.”
In his press conference following the decision, Fed chair Jerome Powell acknowledged that inflation has eased but remains too high and rate cut expectations have been pushed out due to slower-than-expected progress in bringing price growth down to the central bank’s 2% goal.
Fed stands pat on rates as it sees one cut in 2024
“I think the main takeaway will be that the market was probably expecting the Fed to shift the dot plot from three cuts to two cuts,” Mayfield added. “Instead it was shifted from three cuts to one cut, which on margin is a hawkish surprise.”
Still, financial markets are pricing in a 61.5% likelihood of a 25-basis-point rate cut in September, up from 46.8% on Tuesday, according to CME's FedWatch tool.
The Dow Jones industrial average fell 35.21 points, or 0.09%, to 38,712.21, the S&P 500 gained 45.71 points, or 0.85%, to 5,421.03 and the Nasdaq Composite added 264.89 points, or 1.53%, to 17,608.44.
US treasury yields slid after the data, but retraced a bit after the SEP release. US benchmark 10-year treasury notes last rose to yield 4.3277%, from 4.402% late on Tuesday. The 30-year bond rose to yield 4.4846%, from 4.535% late on Tuesday.
The dollar pared its losses against a basket of world currencies after the central bank cut its 2024 rate-cut expectations.
The dollar index fell 0.46%, with the euro up 0.61% to $1.0804.
Reuters
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