US Stocks Climb as Fed’s Brainard Buoys Sentiment: Markets Wrap

(Bloomberg) -- US stocks climbed after Federal Reserve Vice Chair Lael Brainard said that it would be appropriate “soon” for the central bank to slow its pace of interest-rate hikes, which signaled to some investors that she favors a half-point hike as early as next month.

The S&P 500 rose after wavering for most of the session. The tech-heavy Nasdaq 100 also gained after falling as much as 1.3% earlier in the session. Treasury yields climbed, with the 10-year rate hovering around 3.87%.

Fed Governor Christopher Waller’s hawkish comments over the weekend had wobbled markets earlier on Monday as investors mulled whether the post-CPI euphoria was overblown. Brainard’s comments at a Bloomberg event in Washington buoyed market sentiment after she said it makes sense for the Fed to moderate the size of its rate hikes soon. However, she did caution that the Fed had “additional work to do” to bring inflation down, which still kept some investors on the edge.

Last week’s rally, which propelled the S&P 500 to its best week since June, may be unsustainable, according to Christopher Smart, chief global strategist at Barings and head of the Barings Investment Institute.

“The bad news is that in an economic moment that remains so uncertain, the data is more likely than not to be messy and contradictory in the months ahead. The pace of decline will be uneven,” he said. “Moreover, there’s still a long way to go to get to the Fed’s target of 2% average inflation. That’s why Fed governors have been lining up to talk down any market euphoria that a real pivot is in sight.” 

Read More: Wall Street Managers Are Pushing Back on Easing Inflation Hopes

Meanwhile, Chinese stocks listed in the US extended their rally to a third day, after Joe Biden and Xi Jinping called for reduced tensions between the world’s two biggest economies during a meeting in Bali, Indonesia. 

The DAX Index, Germany’s main equity benchmark, rallied 20% from its September low. It was set to enter a bull market as investors bought shares on optimism that China is easing Covid restrictions and that its relations with the US are improving.

Cryptocurrencies rose on plans by Binance Holdings Ltd. to set up a recovery fund to stabilize the industry after FTX’s bankruptcy sparked market-wide losses of around $200 billion in the past week. 

Key events this week:

• Fed’s John Williams moderates panel, Monday
• China retail sales, industrial production, surveyed jobless, Tuesday
• Former US President Donald Trump plans to make an announcement, Tuesday
• US empire manufacturing, PPI, Tuesday
• US business inventories, cross-border investment, retail sales, industrial production, Wednesday
• Fed’s John Williams, Lael Brainard and SEC Chair Gary Gensler speak, Wednesday
• ECB President Christine Lagarde speaks, Wednesday
• Eurozone CPI, Thursday
• US housing starts, initial jobless claims, Thursday
• Fed’s Neel Kashkari, Loretta Mester speak, Thursday
• US Conference Board leading index, existing home sales, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 1:23 p.m. New York time
• The Nasdaq 100 rose 0.1%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World index rose 1.8%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%
• The euro was little changed at $1.0353
• The British pound fell 0.4% to $1.1787
• The Japanese yen fell 0.9% to 140.04 per dollar

Cryptocurrencies

• Bitcoin rose 1.2% to $16,557.69
• Ether rose 1.8% to $1,238.08

Bonds

• The yield on 10-year Treasuries advanced six basis points to 3.87%
• Germany’s 10-year yield declined one basis point to 2.15%
• Britain’s 10-year yield advanced one basis point to 3.37%

Commodities

• West Texas Intermediate crude fell 3.3% to $86.06 a barrel
• Gold futures rose 0.2% to $1,773.70 an ounce

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