The S&P 500 experienced a 0.7% increase, driven by strong performances from Nvidia Corp., Apple Inc., and Amazon.com Inc. Meanwhile, the Nasdaq 100 saw a rise of 0.5%. The 10-year US Treasury yield has risen to 4.55%, marking a peak not observed since May. A Bloomberg dollar index reduced its earlier increase but remained near the highs seen in 2022.
On Thursday, new data revealed the ongoing resilience of the US economy. In a significant update, one of the Federal Reserve’s favored measures of inflation has been adjusted to 2.2%. Chair Jerome Powell has indicated that any future easing will depend on new advancements in inflation. As a result, markets are poised to closely monitor the final significant data release of the year — the personal consumption expenditures for November, which is set to be published on Friday.
On Wednesday, the Federal Reserve reduced its forecast for interest rate cuts in 2025 to two, causing a significant reaction in the markets. This announcement led to a decline in stock prices and an increase in Treasury yields. According to Evercore ISI’s Krishna Guha, the central bank’s anticipated hawkish pivot was likely part of their plans for the upcoming year prior to the meeting. On Wednesday, Powell reported that certain policymakers have started to incorporate the possible effects of increased tariffs that President-elect Donald Trump might introduce into their forecasts.
In a recent note, Guha stated, “To a large degree, the Fed decided to pad its forecast and pre-position for Trump – pulling forward much of what would otherwise have been a hawkish update in March.”
According to Guha, the Fed’s announcement regarding a new phase of policy is characterized as “hawkish absolutely, but not as hawkish as it looked.” He anticipates that the US central bank will forgo an interest-rate cut in January, provided there are no signs of weakness in the labor market.
The swaps market currently suggests that there will be fewer than two quarter-point reductions throughout 2025, a figure that is even lower than what was indicated in the Federal Reserve’s dot plot released on Wednesday.
On Thursday, traders analyzed the gross domestic product figures. Recent data indicates that the US economy experienced a more rapid expansion in the third quarter than analysts had anticipated. Consumer spending has seen an increase. Last week, there was a notable decline in applications for US unemployment benefits, reflecting the volatility typically associated with the holiday season. In November, existing-home sales in the US reached a rate exceeding 4 million, marking the first occurrence of this milestone in six months.
The Bank of England has decided to maintain borrowing costs at 4.75%, leaving rates unchanged. Money markets are currently anticipating two quarter-point reductions and a significant likelihood of a third in 2025, following a Thursday meeting where three members of the nine-member policy committee advocated for a cut. Prior to the announcement, swap traders had anticipated fewer than two reductions next year.
The pound has reduced its earlier gains.
The yen has weakened beyond another significant threshold following remarks from BOJ Governor Kazuo Ueda, which raised questions about the bank’s ability to increase interest rates in January. The currency experienced a depreciation of up to 1.3%, falling below the 156 mark against the dollar.
In China, authorities increased support for the currency through its daily reference rate following the Federal Reserve’s cautious stance on potential future rate cuts, which caused the offshore yuan to hit a new one-year low.
In the commodities market, oil has remained within its recent trading range.
This week saw several significant events unfold:
The United States is set to release a revised GDP figure this Thursday.
Initial jobless claims in the US were reported on Thursday.
Japan’s Consumer Price Index is set to be released this Friday.
On Friday, China announced its loan prime rates.
Consumer confidence in the Eurozone is set to be released on Friday.
On Friday, the United States will release data on personal income, consumer spending, and PCE inflation.
Here are the key developments in the markets:
Equities
As of 11:33 a.m. New York time, the S&P 500 experienced an increase of 0.7%.
The Nasdaq 100 experienced an increase of 0.5%.
The Dow Jones Industrial Average experienced an increase of 0.7%
The Stoxx Europe 600 experienced a decline of 1.5%.
The MSCI World Index showed minimal movement.
The topic at hand is currencies.
The Bloomberg Dollar Spot Index experienced an increase of 0.2%.
The euro experienced an increase of 0.3%, reaching a value of $1.0384.
The British pound experienced a decline of 0.1%, settling at $1.2558.
The Japanese yen experienced a decline of 1.8%, reaching a value of 157.66 against the dollar.
Digital currencies
Bitcoin experienced a decline of 0.5%, bringing its value to $100,436.51.
Ether experienced a decline of 2.2%, bringing its value down to $3,608.28.
Bonds are financial instruments that represent a loan made by an investor to a borrower, typically corporate or governmental. They are used by entities to raise capital and are characterized by fixed interest payments and a return of principal at maturity.
The yield on 10-year Treasuries increased by three basis points, reaching 4.55%.
Germany’s 10-year yield increased by six basis points, reaching 2.31%.
Britain’s 10-year yield increased by three basis points, reaching 4.58%.
Commodities are essential goods that are traded in bulk and are often used as inputs in the production of other goods or services. They include a wide range of products such as agricultural items, metals, and energy resources. The trading of commodities plays a significant role
West Texas Intermediate crude experienced a decline of 0.6%, settling at $70.17 per barrel.
Spot gold experienced an increase of 0.3%, reaching $2,592.66 per ounce.
This report was generated with the help of Bloomberg Automation.
–Contributions were made by Cecile Gutscher, Divya Patil, and Cristin Flanagan.
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