Stocks Rise as 10-Year Yield Retreats and Fed Officials Comment on Policy Moves
Stocks rose on Friday, with the Dow Jones Industrial Average gaining 0.3%, and the S&P 500 up 0.7%. The Nasdaq composite, consisting of many technology stocks, rose 1.1%, while Marvell Technologies (MRVL) dropped by over 9% following a disappointing outlook for the first quarter earnings. Meanwhile, C3.ai (AI) soared 33% after the AI software company reported a big quarterly earning beat.
After recently reaching its highest level since 2010, the 10-year Treasury yield fell back below the important 4% mark. Data indicating a return to growth in U.S. services activity for the first time in eight months has caused a retreat in yields, suggesting that the economy is still strong enough to tolerate further rate hikes.
It is anticipated that the Federal Reserve will raise rates to 5% at least twice more, but further increases may be a possibility. Aditya Bhave, an economist at Bank of America, declared on Tuesday that the Federal Reserve may need to increase rates to near 6% in order to bring inflation back to roughly 2% on a yearly basis. He forecasted that the peak federal funds rate this year would be more than what the market had predicted.
The markets are firmly predicting at least three more quarter-point increases in the Federal Reserve rate, with a fair likelihood of a 50-basis-point increase in either March or May. A few people now lean toward a fourth quarter-point increase at the July gathering. The fed funds range would be increased to 5.5%-5.75%, up from the current 4.5%-4.75
On Wednesday, the ISM Manufacturing PMI for February increased to 47.7, up from 47.4 in the previous month; however, it remained below 50 for four consecutive months, signifying continued contraction. The Prices Paid Index of the Institute for Supply Management's Manufacturing survey was 51.3 in February, an increase from January's 44.5 and surpassing the expected 45.1, indicating that “the decrease in goods prices may have reached its limit.”
Investors also digested comments from Federal Reserve officials on the central bank's next policy move. On Thursday, a rally in stocks occurred during the session after Atlanta Fed President Raphael Bostic suggested a 25 basis-point interest rates hike in March, while Fed Governor Christopher J. Waller had previously suggested that rates could go higher than markets were anticipating.
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1. “Dow Jones Rises After Economic Data; AI Stock Soars 23% On ‘Dramatic Change' In Sentiment” Investor's Business Daily, 3 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-rise-ahead-of-economic-data-ai-stock-soars-on-dramatic-change-in-sentiment/
2. “Stock Index Futures Move Higher As Dovish Fed Comments Boost Hopes Of Fed Pivot” Barchart, 3 Mar. 2023, https://www.barchart.com/story/news/14739365/stock-index-futures-move-higher-as-dovish-fed-comments-boost-hopes-of-fed-pivot
3. “US equities look to build on yesterday's late bounce” ForexLive, 3 Mar. 2023, https://www.forexlive.com/news/us-equities-look-to-build-on-yesterdays-late-bounce-20230303/
4. “S&P 500 in search of first weekly win in four weeks as rates retreat to boost tech By Investing.com” Investing.com, 3 Mar. 2023, https://www.investing.com/news/stock-market-news/sp-500-in-search-of-first-weekly-win-in-four-weeks-as-rates-retreat-to-boost-tech-3022017
5. “What To Do As Market Roars Back; AI Stock Soars Into Buy Zone” Investor's Business Daily, 3 Mar. 2023, https://www.investors.com/market-trend/stock-market-today/market-rally-stages-bullish-comeback-despite-soaring-yields-tumbling-tesla-ai-stock-surges-late/
6. “Stocks Mixed Before The Open As Bond Yields Tick Higher On Fed Concerns, ECB Minutes In Focus” Barchart, 2 Mar. 2023, https://www.barchart.com/story/news/14699726/stocks-mixed-before-the-open-as-bond-yields-tick-higher-on-fed-concerns-ecb-minutes-in-focus
7. “Stock market news today: Dow jumps 387 points as rate fears ease” Markets Insider, 3 Mar. 2023, https://markets.businessinsider.com/news/stocks/stock-market-news-today-dow-rally-fed-interest-rate-hikes-2023-3
8. “S&P 500, Dow, Nasdaq slump again on ongoing Fed concerns” Seeking Alpha, 1 Mar. 2023, https://seekingalpha.com/news/3942838-sp-500-dow-nasdaq-slump-again-on-ongoing-fed-concerns
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