Barron’s stock market columnist Randall W. Forsyth wrote an article on Friday (3rd) that the recent sharp rebound in U.S. stocks and U.S. bonds may extinguish hopes of the Federal Reserve (Fed) cutting interest rates.
Due to a combination of factors, long-dated U.S. Treasuries posted their biggest gains last week since U.S. bond yields plummeted in March 2020 during the COVID-19 pandemic.10-year U.S. Treasury yieldIt fell 16 basis points to 4.51% on Friday. That’s down sharply from the 5% mark it hit just a few weeks ago.
The major U.S. stock indexes closed in the red on Friday, recording their best weekly gains so far this year.Dow JonesThe weekly increase reached 5.07%, the best weekly increase since October 2022. The S&P gained as much as 6% on the week, its best week since November 2022.
Forsythe analyzed that this should be thanked to Treasury Secretary Yellen, Federal Reserve Chairman Jerome Powell, and the Bureau of Labor Statistics. They all indicated in their own ways this week that the sharp rise in benchmark interest rates has reached a peak, thus pushing up asset prices within the risk range. .
Federal Reserve Chairman Jerome Powell said that whether the Fed needs to raise interest rates again is an open question and that it is “proceeding with caution” (Photo: REUTERS/TPG)
At the beginning of this week, the US Treasury Department’s quarterly repayment statement showed that the planned debt issuance amount in the fourth quarter was US$776 billion, which was US$76 billion lower than expected three months ago, triggering a large-scale short covering of US debt.
The Federal Open Market Committee (FOMC) voted on Wednesday to keep interest rates on hold at a 22-year high, which did not surprise the market, but Fed Chairman Jerome Powell said it was an open question whether the Fed would need to raise interest rates again. problem and is “proceeding with caution,” an assessment that typically signals the Fed’s reluctance to raise interest rates in the near term.
Friday’s nonfarm payrolls report further supported this view, as the labor market showed signs of cooling, with nonfarm payrolls rising by 150,000 in October, below economists’ expectations of 180,000, while the unemployment rate climbed. To 3.9%, the average hourly wage increased by 4.1% in October, lower than the 4.3% increase in September.
According to data from CME’s FedWatch tool, traders on Friday predicted a 95% chance that the Federal Reserve would not raise interest rates at its next meeting, up about 15% from the previous day, while the probability of a rate cut in May next year climbed to more than 63%.
Barron’s stock market columnist Randall W. Forsyth pointed out that various data appear to indicate to bulls that the Federal Reserve is unlikely to further raise interest rates. The sharp gains in bond and stock markets reflect growing hopes for a soft landing for the economy, which means no further U.S. interest rate hikes in the coming year and an eventual cut, but ironically, soaring U.S. stocks and U.S. Treasury bonds could hinder This possibility.
Forsythe said that the reason why the Fed did not raise policy rates was partly due to the previous tightening of financial conditions, especially the rise in bond yields, the strength of the U.S. dollar and the sell-off in U.S. stocks. This seems to be a reasonable reasoning, but in the past week , a rebound in U.S. stock and U.S. bond prices, coupled with a weaker dollar, could further delay a long-forecast economic slowdown.
2023-11-04 03:17:57
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