Wall Street pushes Treasury yields, higher stocks By Reuters


© Reuters. FILE PHOTO: Men wearing protective face masks walk under an electronic board showing Japan’s Nikkei share average inside a conference hall, amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 25, 2022. REUTERS/Issei Kato


By Lawrence Delevingne and Elizabeth Howcroft

BOSTON/LONDON (Reuters) – US stocks regained ground on Tuesday, while Treasury yields climbed and oil dipped, as investors adjusted their expectations for hikes following hawkish comments from the US Federal Reserve.

The rose 219.79 points, or 0.64%, to 34,772.78, the gained 45.91 points, or around 1%, to 4,507.09 and the added 261.90 points, or 1.89%, to 14,100.36.

Wells Fargo (NYSE:) & Co rose nearly 5% as banks look to benefit from higher interest rates and sports apparel giant Nike Inc (NYSE:) advanced around 4% after it beat quarterly profit expectations.

Fed Chair Jerome Powell said on Monday the central bank could move “more aggressively” to raise rates to fight inflation, possibly by more than 25 basis points (bps) at once.

The market is pricing in a 72.2% probability that the Fed will hike the fed fund rate 50 basis points when policymakers meet in May, up from a probability of just over 50% on Monday.

At around 1500 GMT, the was at 2.375%, having hit its highest level since 2019.

RBC Capital Markets’ chief US economist, Tom Porcelli, wrote in a note to clients that during Powell’s speech “it was easy to wonder if a 75bps hike or even going intra-meeting is possible.”

“Both outcomes seem incredibly extreme but when we hear Powell talk about inflation he comes off as incredibly anxious to us.”

Euro zone government bond yields also rose, with Germany’s benchmark 10-year yield hitting around 0.512%, its highest level since 2018.

Although Wall Street had closed lower on Monday after Powell’s comments, stock markets in Europe rose. The was up 0.8%, having climbed in recent sessions to reach a one-month high. London’s was up 0.4%.

The MSCI world equity index, which tracks shares in 50 countries, was up nearly 1% on the day.

Matthias Scheiber, global head of multiasset portfolio management at Allspring Global Investments, said the pickup in stocks could be a case of investors buying the dip, but that growth stocks would struggle if the US 10-year yield moves closer to 2.5%.

“We saw the sharp rise in yields yesterday and we see that continuing today on the long end, so that’s likely to put pressure on equities … It will be hard for equities to have a positive performance.”

But JPMorgan (NYSE:) said that 80% of its clients plan to increase equity exposure, which is a record high.

“With positioning light, sentiment weak and geopolitical risks likely to ease over time, we believe risks are skewed to the upside,” wrote JPMorgan strategists in a note to clients.

“We believe investors should add risk in areas that overshot on the downside such as innovation, tech, biotech, EM/China, and small caps. These segments are pricing in a severe global recession, which will not materialize, in our view.”

The conflict in Ukraine continued to weigh on sentiment. US President Joe Biden issued one of his strongest warnings yet that Russia is considering using chemical weapons.

Oil prices retreated on Tuesday after surging the day before.

fell around 2% to $109.90 per barrel and was at $114.63, down 0.86% on the day.

The was steady at 98.48, while the euro was up 0.1% at $1.102.

dropped 1.1% to $1,914.40 an ounce, pressured by the Fed chief’s hawkish approach to tackling inflation.

Leading cryptocurrency was up about 4% at around $42,723, adding to its gains since its intraday low of $34,324 on Feb. 24 when Russia invaded Ukraine.

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