Reversal.
Robert R. Fragnito
Chief Operating Officer | Financial Advisor | Portfolio Manager at MCF Capital Management, LLC
US stocks finished higher on Thursday after staging a significant reversal in the final hours of trade, even as Treasury yields rose.
It was a choppy day on Wall Street, stocks started the day in negative territory, but then staged a reversal after Atlanta Fed President Raphael Bostic spoke. Despite Bostic's comments, Treasury yields remained elevated as the 10YR stayed over 4%. The yield on the benchmark rose as this morning’s initial jobless claims showed that the labor market is still strong.
Here’s the story of the day. Sentiment was boosted after Bostic said the Federal Reserve could be in a position to pause rate hikes sometime this summer, Bloomberg reported on Thursday.
Bostic also said there is a case for an upward revision to the current terminal rate projection, and he firmly supports a 25 bps hike at the next policy meeting later this month. Furthermore, the Atlanta Fed President expects Fed policy to “bite” starting in the spring.
Earlier this morning, the Labor Department released its revision on US labor costs and productivity for Q4. Labor costs came in higher than expected, while productivity slumped. Reaction: the dollar strengthened, and the S&P lost ground.??
Across the pond, Eurozone inflation ticked lower, but was higher than expected. ECB President Christine Lagarde said on Thursday that the case for a 50 bps hike this month is still on the table.
Investors continue to grapple with the future course of monetary policy, and the Bostic comments gave markets something to chew on. This is pure speculation, but Bostic may have been influenced by a recent report from the Cleveland Fed.
According to the median of seven simple monetary policy rules, the Cleveland Fed reports that the fed funds rate should actually be at 4.38% in Q1—we’re currently at 4.50-4.75%. In Q1 of next year, the forecast points towards a fed funds at 4.31%.
These numbers are clearly well below some figures that have been put out there by several Fed officials, but these rules are taken seriously by these officials, and perhaps there's a silver lining here.?
Tomorrow is another big day as investors wait on services data from the Institute of Supply Management and S&P Global.
Stay Tuned!?
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THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INVESTMENT ADVICE.?
?? SOURCES: MarketWatch, Investing.com, Reuters, CNBC, Financial Juice
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