Wall Street posted its best day since late July as falling bond yields eased some of the pressure that has hit markets. The Dow Jones hill 2,7% up, while the Nasdaq went up 2,3% and the reference index, the S&P 500grew up 2,6 percent.
Treasury yields fell after a report on US manufacturing came in weaker than expected. This could mean that the Federal Reserve will not have to be as aggressive in raising interest rates to reduce the high inflation that is hurting household finances, but analysts still see much more turmoil ahead.
A couple of reports on Manufacturing sector US were weaker than expected. So were data on spending on building in all the country. Although this may seem daunting, it could mean that the Federal Reserve will not have to be as aggressive in raising interest rates to combat the high inflation that is damaging household finances.
By raising rates, the Federal Reserve is making it more expensive to buy a house, a car, or anything else bought on credit. The hope is to slow the economy enough to deprive inflation of the purchases needed to keep prices rising so rapidly. But the Federal Reserve also risks causing a recession if it goes too far.
The Federal Reserve has already withdrawn its key overnight rate and placed it between 3% and the 3,25%, compared to a practically zero level in March. Most traders expect it to rise more than a percentage point early next year.
The two-year Treasury yield, which more closely tracks expectations for Federal Reserve action, fell to 4,11% from the 4,27% after weaker-than-expected economic reports.
In addition to stocks, lower rates also boost the prices of everything from cryptocurrencies until the orowhich can suddenly seem a bit more appealing when bonds are paying less in income.
However, cross currents continue to cycle through the markets and analysts expect strong oscillations Of the prices.
The prices of raw rose on Monday on speculation that major oil-producing countries could soon announce production cuts. This adds upward pressure on inflation.
More turbulence could arrive for the markets on Friday, when the latest update of the mercado work American. Along with his reports on the inflationthe monthly report on US government employment has been one of the most anticipated data on Wall Street.
It will be the last jobs report before the Federal Reserve makes its next interest rate decision, scheduled for November 2, and continued strength would give the central bank more reason to go higher. Traders say it is most likely that there will be a fourth rise consecutive no less than three-quarters of a percentage point, triple the usual.
For the markets to make a significant move higher, many investors say they need to see a break in inflation cause the Fed to abandon its aggressive path.
These hopes of apivot” from the Fed by investors have resurfaced repeatedly over the past year, only to be brought down by further accelerations in inflation.
But with the strain building in financial markets as central banks around the world raise rates in concert, the conditions have arrived. “to the danger zone where ‘bad things’ happen”according to Michael Wilson, an equity strategist at Morgan Stanley.
That could make the Fed blink at some point. The problem, according to Wilson, is that another force weighing on markets could soon come to the fore: weakening corporate earnings.
A set of challenges, from higher interest rates to the rising value of the dollar, may be setting things up for “the freight train of the looming earnings recession”, he wrote in a report. Companies are preparing to report how the summer fared in the coming weeks, and analysts have lowered their expectations.
(With information from AP)
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