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Stocks Rise, Yields Fall as Fed Skips Bets on Data

August 29, 2023
minute read

Wall Street traders orchestrated a surge in the stock market, causing bond yields to retreat, driven by economic reports that fueled speculation of an impending pause in the Federal Reserve's interest-rate hikes scheduled for September.

The S&P 500 index advanced towards its lengthiest winning streak in a month, surpassing the 4,450 mark. The ascent was propelled by a rally in major players like Tesla Inc. and Nvidia Corp., resulting in a 1.5% increase in the Nasdaq 100. Notably, yields on the two-year Treasury, which exhibit heightened sensitivity to imminent policy adjustments, witnessed a decline of 14 basis points to reach 4.9%. In tandem, Bitcoin demonstrated a 5% rally as a US court paved the way for the inaugural exchange-traded fund tracking the cryptocurrency.

Analyses of swap contracts revealed diminishing wagers on a Federal Reserve rate hike within the year 2023, accompanied by an elevated probability of a rate reduction in the first half of 2024.

Recent data unveiled that US job openings plummeted below expectations to 8.83 million, marking a nadir not observed in over two years. This provides fresh substantiation of a waning labor demand. A separate report indicated a notable decline in consumer confidence, registering the most significant drop in two years. Souring perspectives on employment prospects, augmented borrowing costs, and persistent inflationary pressures collectively curtailed optimism.

Jeffrey Roach, Chief Economist at LPL Financial, commented, "The Fed reiterated its commitment to be data-dependent, and with reports like this, the Fed can most likely keep rates unchanged in September. Investors should expect a softening labor report this Friday, further cementing the thesis that the Fed is getting close to finishing its tightening cycle."

Adan Harris
Managing Editor
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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