Treasury yields dropped as Fed officials on Tuesday suggested the U.S. central bank could be near the end of its tightening cycle, helping U.S. equity indexes to gain, with the Nasdaq nearly 1 per cent higher as large-cap growth stocks soared
The dollar gained and world shares cut losses on Tuesday, as stocks on Wall Street soared and investors evaluated US Federal Reserve commentary about a too-strong U.S. economy that could require another interest rate hike to check inflation.
Gold reached a two-week low as the safe-haven rally sparked by Mideast tensions ebbed and oil prices reached 2-1/2-month lows as mixed economic data from China offset the effect of Saudi Arabia and Russia extending output cuts.
Treasury yields dropped as other Fed officials speaking on Tuesday suggested the central bank could be near the end of its tightening cycle, helping U.S. equity indexes to gain, with the Nasdaq nearly 1 per cent higher as large-cap growth stocks soared.
The rally on Wall Street pushed the S&P 500 and Nasdaq to their longest winning streaks in two years.
But Fed Governor Christopher Waller said “blowout” Q3 U.S. economic growth at an annualized 4.9 per cent rate warrants watching as the U.S. central bank considers its next policy moves, leading a colleague to explicitly call for another hike.
Fed Governor Michelle Bowman said she took the recent GDP number as proof the U.S. economy not only “remained strong,” but may have gained speed and require a higher Fed policy rate.
We are in for a much longer cycle of higher rates than the most bullish people are expecting, said Rick Meckler, partner at Cherry Lane Investments in New Jersey. Inflation is something that we have learned is hard to tamp down once it really gets going.
The dollar gained as last week’s rally in riskier currencies took a breather, gaining on the euro following a larger-than-expected decline in German industrial production in September.
The dollar on a broad basis is still quite strong, said Brad Bechtel, global head of FX at Jefferies in New York. The economy’s going to hold in there, and then we get these dovish pendulum swings back the other way, which is where we are at now.
Against a basket of currencies, the dollar index added 0.25 per cent to 105.52, with the euro 0.2 per cent lower to $1.0694.
The euro and most other currencies advanced sharply on the dollar last week after various data – most notably a U.S. labour report that showed job growth declined in October.