In a bear market fueled by tighter monetary policy and concerns about the global economy, investors were relieved to see the S&P 500 on course to break three weeks of losses.
U.S. stock index futures increased, with contracts for the S&P up 0.8%. In the last four trading days, the benchmark index gained 2.1%. Futures on the Nasdaq-100 and Dow Jones Industrial Average also rose.
As the Fed has increased interest rates to combat inflation, stock prices have generally declined this year.
However, since the start of the summer, the market has seen occasional gains as traders and buyers purchase bearish stocks.
Some market watchers and investors believe that more turbulence is on the horizon. The Federal Reserve, along with its British and European Union equivalents, have all made it plain that they want to reduce inflation, even if doing so causes economic contractions. In addition, covid-19 lockdowns in China and the European energy crisis are further threats to the world economy.
According to Rabobank’s director of rates strategy Richard McGuire, “we have this long-running, learned, Pavlovian reaction that when demand begins to wane or equities prices are decreasing, we have been conditioned for central banks to fill up the punch bowl for investors.”
Mr. McGuire said that with inflation far beyond the Fed’s objective, central banks actively seek to reduce demand for goods and services by increasing interest rates and to sell off asset holdings. That is horrible news for hazardous investments, he warned.
At 12 p.m. ET, Fed Governor Christopher Waller will give a speech on the economy, and investors will be attentive for any hints he may provide about the future course of central bank policy. At its September meeting, CME Group has estimated that traders anticipate a rate hike of 0.375 percentage points from the central bank.
However, the dollar declined on Friday, dragging the ICE Dollar Index down by 0.6% as investors were less worried about the global economy. It’s been quite the turnaround for the greenback, which had been rising as European currencies felt the pinch of soaring oil costs and the Japanese yen felt the effects of monetary easing.
Although oil prices did go up a little, it wasn’t enough to prevent a weekly loss. In recent sessions, Brent oil prices have fallen on fears that a weakening global economy could reduce gasoline demand.
Prices for bonds went up, resulting in reduced yields. As of Friday morning (3/251), the yield on 10-year U.S. Treasuries was 3.251%, down from Thursday’s 3.291%.
The world’s stock markets all rose.
Shares of basic-resource businesses and financial institutions drove a 1.6% increase in the Stoxx Europe 600 index. Rio Tinto, Miners Glencore, and Anglo American all gained over 3%, while financial institutions Intesa Sanpaolo and Banco Bilbao Vizcaya Argentaria each gained over 4%.
With China’s inflation data for August coming in lower than expected, investors in Hong Kong sent the benchmark Hang Seng index soaring by 2.7%. China’s healthcare and real estate industries contributed significantly to the 1.4% increase in the CSI 300 index.
The Chinese National Bureau of Statistics reported that consumer prices grew 2.5% in August from the same period last year, down from the 2.7% increase in July. Inflation has slowed, which is good news for authorities trying to revive the economy amid other headwinds, including the housing market’s slump.