U.S. stocks bounced and Treasury yields retreated on Tuesday in choppy trade as investors absorbed remarks from the Federal Reserve that interest rates are likely to rise this year, as expected.
In comments to U.S. lawmakers, Federal Reserve Chairman Jerome Powell said he expected the Fed would raise rates and end its asset purchases this year, but that the central bank had made no decision about the timing for tightening monetary policy.
“Inflation is running very far above target. The economy no longer needs or wants the very accommodative policies we have had in place,” Powell said in his testimony.
The Dow Jones Industrial Average closed up 0.51%, the S&P 500 added 0.92%, and the Nasdaq Composite climbed 1.41%.
The pan-European STOXX 600 index rose 0.84% and MSCI’s gauge of stocks across the globe gained 0.94%.
“Comments from Fed Chair Jerome Powell reassured investors that the Fed is prepared to tighten monetary policy to maintain price stability,” analysts at Australia’s ANZ Bank said in a note.
Inflation pressures prompted the Fed in December to flag plans to tighten policy faster than expected, possibly even raising rates in March, though that was before it became clear just how fast the Omicron coronavirus variant would spread.
Some investors were relieved that the Fed did not sound more hawkish than the market had anticipated, and this helped Treasury yields pull back a touch from two-year highs struck earlier.
Benchmark 10-year Treasury yields retreated to 1.741%, after hitting an almost two-year high above 1.8% overnight.
Two-year Treasury yields, which are highly sensitive to interest rates, dipped to 0.8966%, down from a high of 0.945% last seen in February 2020. [US/]
The recovery in risk appetites weighed on the dollar. The dollar index, which measures the currency against a basket of six major currencies, fell 0.34% to 95.614. A softer dollar lifted the euro up 0.3% to $1.13670. [USD/]
The weaker dollar benefited bullion, and spot gold added 1.2% to $1,822.75 an ounce. U.S. gold futures gained 1.34% to $1,822.50 an ounce. [GOL/]
U.S. December consumer inflation data will be released on Wednesday with headline CPI expected to hit a red-hot 7% year- on-year, boosting the case for rates to rise sooner rather than later.
“We continue to believe liftoff in March is increasingly likely. How these debates are settled will likely have implications for post-liftoff rate hikes,” Nomura economists said in a report, referring to U.S. monetary policy.
“In particular, we believe comments regarding earlier runoff and less aggressive rate hikes support our view that the Fed will slow the pace of rate hikes to two per year in 2023.”
Oil rose to nearly $82 a barrel, supported by tight supply and hopes that rising coronavirus cases and the spread of the Omicron variant would not derail a global demand recovery.
U.S. crude recently rose 3.82% to $81.22 per barrel and Brent was at $83.72, up 3.52% on the day.
Stronger risk appetites supported bitcoin, which rose 2.1% to $42,722.21, after dropping below $40,000 the previous day for the first time since September.
(Reporting by Karin Strohecker, Sujata Rao and Tommy Wilkes in London and Anshuman Daga in Singapore; Editing by David Goodman, Gareth Jones, Mark Heinrich and Cynthia Osterman)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
