BNN Bloomberg's mid-morning market update: May 25, 2022
Stocks climbed after minutes from the Federal Reserve’s latest policy meeting gave no signals that officials could turn more hawkish soon to fight inflation.
The S&P 500 rebounded from earlier losses, while the tech-heavy Nasdaq 100 outperformed. The dollar pared gains. Treasury two-year yields -- which are more sensitive to imminent policy moves -- edged higher, while the 10-year rate wavered. In late trading, Nvidia Corp., the largest US chipmaker by market value, slid after Chinese supply-chain woes and the war in Ukraine weighed on its sales forecast.
Most US policy makers saw half-point rate increases as appropriate at the next two meetings, consistent with Chair Jerome Powell’s comments. While they noted the potential for rates to go high enough to constrain the economy, there were hints of a possible pause -- an “expedited” tightening would leave the Fed “well positioned later this year to assess the effects of policy firming and the extent to which economic developments warranted policy adjustments.”
- “After the July meeting, the Fed is likely to become more ‘data dependent’ with regard to rate hikes,” said Bob Miller, BlackRock’s head of Americas fundamental fixed-income.
- “The FOMC will likely hike by 50 bps at their upcoming meeting, but if growth prospects falter, the FOMC could likely revert to more conservative 25 basis point hikes in subsequent meetings,” said Jeffrey Roach, Chief Economist for LPL Financial, referring to the Federal Open Market Committee.
- “The minutes came in close to market pricing,” said Priya Misra, global head of rates strategy at TD Securities.
- “While the Fed has been under the microscope for quite some time now, it’s important to keep in mind that the minutes were from weeks ago,” said Mike Loewengart, managing director of investment strategy at E*Trade from Morgan Stanley. “It’s possible that investors will be in wait-and-see mode until the next Fed meeting to get it straight from the source.”
- “We got some confirmation that the Fed is going to stay aggressive for at least the next few meetings,” said Matt Maley, chief market strategist for Miller Tabak + Co. “However, investors seem to be getting more comfortable with the thought that ‘tearing the bandaid off’ quickly might actually be what we need.”
Here are some key events to watch this week:
- Bank of Korea rate decision Thursday
- US GDP, initial jobless claims Thursday
- US core PCE price index; personal income and spending; wholesale inventories; University of Michigan consumer sentiment Friday
Some of the main moves in markets:
- The S&P 500 rose one per cent as of 4 p.m. New York time
- The Nasdaq 100 rose 1.5 per cent
- The Dow Jones Industrial Average rose 0.6 per cent
- The MSCI World index rose 0.7 per cent
- The Bloomberg Dollar Spot Index rose 0.2 per cent
- The euro fell 0.5 per cent to US$1.0677
- The British pound rose 0.4 per cent to US$1.2577
- The Japanese yen fell 0.4 per cent to 127.31 per dollar
- The yield on 10-year Treasuries was little changed at 2.75 per cent
- Germany’s 10-year yield declined one basis point to 0.95 per cent
- Britain’s 10-year yield advanced two basis points to 1.91 per cent
- West Texas Intermediate crude rose 0.9 per cent to US$110.81 a barrel
- Gold futures fell 0.7 per cent to US$1,859.20 an ounce