US stocks ended the week on a high note, thanks to rumours that the Federal Reserve won’t raise interest rates past the already-priced-in peak levels.
The S&P 500 broke a three-week losing streak on Friday when it went up. Since early February, today was the best day for the Nasdaq 100. Even though a report showed that the service sector was holding up, investors bet that the effects of the Fed’s rate hikes on the economy would be delayed. A measure of the prices paid by service providers showed that prices were going up more slowly, which traders liked.
Even though Treasuries went up on Friday, bond yields went up for the week. The yield on a 10-year bond is now around 3.96%. A key measure of the dollar had its worst week since the middle of January, ending a streak of four weeks in which it went up.
The non-farm payrolls report will be closely watched next week to find out if the economy can handle more rate hikes. This week’s data showed that the US labour market is still strong, which supports the case for the Fed to keep its tightening policy. In February, this theme drove almost every major asset into the red.
But investors were encouraged when Raphael Bostic of the Atlanta Fed said on Thursday that the central bank might stop raising rates this summer. Traders saw his comments as dovish, even though Bostic and his colleagues said decisions would still be based on data and a Fed report released on Friday made it clear that more rate hikes are coming.
Priya Misra, global head of rates strategy at TD Securities, said that traders are still optimistic because even the most hawkish Fed officials haven’t said that rates might need to go above the levels that have already been set. Swap markets have been assuming that the Fed policy rate will peak in September at 5.5%.
“I think they stay at 5.5%, and we have to see how the data changes in the second quarter,” she said on Bloomberg Television.
Misra also said that strong data doesn’t mean that the Fed’s efforts to keep raising interest rates aren’t working. She said, “It takes a long time.” “Policies became strict only last year.” On Friday, factory data from China that was better than expected also made people feel better about taking risks. Oil prices went up for the fourth day in a row because people were optimistic about China’s strong recovery.
Some of the main changes in markets:
Stocks As of 4 p.m., the S&P 500 had gone up 1.6%. Time in New York 2% of the Nasdaq 100 went up. The Dow Jones Industrial Average went up 1.2 percent. The MSCI World index went up by 0.4%. Currencies The Bloomberg Dollar Spot Index dropped 0.5 percent. At $1.0634, the euro went up 0.3%. The British pound went up 0.8%, reaching $1.2041. The Japanese yen went up 0.7%, making it worth 135.85 dollars. Cryptocurrencies Bitcoin fell 4.8% to $22,296.29 Ether dropped by 5%, to $1,558.57 Bonds Yield on 10-year Treasuries went down 10 basis points to 3.96 percent. Germany’s 10-year bond yield went down four basis points to 2.72 percent. The yield on Britain’s 10-year bond went down three basis points to 3.85%. Commodities The price of a barrel of West Texas Intermediate crude went up by 2% to $79.74. Gold futures went up 1.1%, reaching $1,861.30 an ounce.