Weak dollar contributes to the growth of stocks
2023.01.12 14:44
Weak dollar contributes to the growth of stocks
By Tiffany Smith
Budrigannews.com – After a reading of consumer prices raised expectations that the Federal Reserve may have leeway to reduce the size of its interest rate hikes, a gauge of global stocks rose on Thursday, while longer-dated U.S. Treasury yields and the dollar fell.
In December, gasoline and other goods saw their prices drop for the first time in more than two and a half years, indicating that inflation was continuing to fall.
However, weekly initial jobless claims came in at 205,000, below expectations of 215,000, according to a separate labor market reading. As a key indicator of slowing inflation, many market participants are looking for labor market weakness.
After the data, Wall Street equities were volatile, falling as much as 0.8 percent before rebounding.
The gained 267.21 points, or 0.79 percent, to 34,240.22, the S&P 500 added 22.82 points, or 0.57 percent, to 3,992.43, and the added 76.93 points, or 0.7 percent, to 11,008.60.
“The report confirms that inflation has reversed and is trending downward. To put it another way, it has reached its peak and appears to be trending downward. That bodes well for the future, “stated Spartan Capital Securities chief market economist Peter Cardillo in New York.
“We can expect a less aggressive Fed if this continues, which is good news.”
MSCI’s gauge of stocks all over the world gained 0.93 percent and was on track for its fifth consecutive session of gains, the longest streak since August, and the pan-European index rose 0.63 percent to close at its highest level since April 29.
According to CME’s FedWatch Tool, expectations for a 50 basis point rate hike at the next Federal Reserve meeting have decreased to 5.8%, from 23.3% the day before. Up from 76.7% on Wednesday, the market now anticipates a 94.2% chance of a 25-basis-point increase.
From 3.556% late on Wednesday, the benchmark U.S. 10-year note was down 11.2 basis points to 3.444%.
The data on inflation, according to St. Louis Fed President James Bullard, are a step in the right direction, and the U.S. economy is set for disinflation this year; however, the path back to the 2% target set by the central bank will be bumpy. Tom Barkin, president of the Richmond Federal Reserve, echoed the sentiment regarding the data, stating that it enabled the Fed to “steer more deliberately.”
Before recouping losses, the reached its lowest level since early June and was last down 0.824 percent, with the euro rising 0.83 percent to $1.0844.
Sterling was last seen trading at $1.2213, up 0.58 percent on the day, while the Japanese yen gained 2.44 percent against the US dollar, reaching a level of 129.32 per dollar.
As a result of the data, crude prices increased, helped along by optimism regarding China’s release from its COVID-19 restrictions, which will increase demand.
Recently increased by 1.47 percent to $78.55 per barrel and was at $84.12, up 1.75 percent for the day.
