Treasuries turned a corner after hot economic data: markets wrapped

Treasuries turned a corner after hot economic data: markets wrapped

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At the end of a week marked by Wall Street optimism that the Fed will be closer to ending its rate hikes, a report showed that consumer sentiment rose to its highest level in nearly two years while short-term inflation expectations rose. Bonds responded immediately, with the front end of the US curve taking the brunt of the selling.

The two-year yield in the United States, which is more sensitive to imminent central bank moves, rose nine basis points to 4.7%. This is a stark contrast to the decline in prices over the past few days. The dollar rose slightly, paring its biggest weekly decline since November.

Stocks briefly erased gains after the economic report, but are still heading for their best week since March. Traders examined the strong results from JPMorgan Chase & Co. and Wells Fargo & Co. and Citigroup Inc, which benefited from higher interest rates — but easily beat lower analyst estimates. Gains in the big-cap space helped support stocks on Friday, with Nvidia Corp hitting an all-time high and Microsoft Corp rising 2%.

According to Mohamed El-Erian, the idea that the US economy could slow enough to avoid a recession is so powerful that it makes no sense to confront it.

“You can’t now stand in the way of a soft narrative — this narrative is building momentum,” Allianz SE chief economic advisor and columnist for Bloomberg Opinion said Friday.

Market optimism that the economy won’t go too hot or too cold is unlikely to last, says Michael Hartnett, a strategist at Bank of America Corp. And the bank wrote in a note, citing EPFR Global data, that global equity funds witnessed inflows of nearly $70 billion in the past seven weeks.

“Goldilocks rules risky assets for now,” but the second half is likely to lead to higher consumer price inflation and tightening policy and saving, he wrote.

He listens: BlackRock’s Reeder says Fed’s 2% target will cost jobs (podcast)

Some of the major movements in the markets:

Stores

  • The S&P 500 was up 0.2% as of 11:30 a.m. New York time.
  • The Nasdaq 100 rose 0.7%.
  • The Dow Jones Industrial Average rose 0.3%.
  • The Stoxx Europe 600 hasn’t changed a bit
  • The MSCI World Index rose 0.2%.

currencies

  • The Bloomberg Spot Dollar Index has not changed
  • The euro rose 0.1 percent to $1.1239
  • The British pound fell 0.1 percent to $1.3119
  • The Japanese yen fell 0.4 percent to 138.67 yen per dollar

Digital currencies

  • Bitcoin fell 0.1% to $31,342.02
  • Ether rose 0.9 percent to $2,003.71

bonds

  • The yield on the 10-year Treasury note advanced three basis points to 3.79%.
  • Germany’s 10-year yield advances 2 basis points to 2.51%
  • The UK 10-year yield was little changed at 4.43%.

goods

  • West Texas Intermediate crude fell 1.5 percent to $75.74 a barrel
  • Gold futures contracts have not changed

This story was produced with help from Bloomberg Automation.

— With assistance from Brett Miller, Tacia Sipahutar, Robert Brand, Lynn Thomason, and Phyllis Marans.

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