Wall Street stocks and Treasury yields rise amid hawkish Federal Reserve comments

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, March 21, 2022. REUTERS/Brendan McDermid

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  • US stocks rebounded, echoing gains in Europe
  • 10-year Treasury yields hit their highest level since 2019
  • Brent crude price is rising again
  • Gold dips, bitcoin rises

BOSTON (Reuters) – U.S. stocks regained ground on Tuesday, while Treasury yields and Brent crude prices continued to climb, as investors revised their expectations for a rate hike after hawkish comments from the U.S. Federal Reserve.

The Nasdaq led Wall Street’s main indexes higher, rising nearly 1.75%, as investors bought the dip in technology stocks and snagged bank stocks, such as Wells Fargo & Co. (WFC.N), which benefit from charging borrowers higher interest rates. Read more

Dow Jones Industrial Average (.DJI) The index rose 258.84 points, or 0.75%, to 34,811.83 points, and the Standard & Poor’s 500 (.SPX) It rose 47.16 points, or 1.06%, to 4508.34 points.

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Federal Reserve Chairman Jerome Powell said on Monday the central bank could move “more aggressively” to raise interest rates to fight inflation, possibly raising more than 25 basis points at one or more meetings this year. Read more

The market is placing a 72.2% probability that the Federal Reserve will raise the federal funds rate by 50 basis points when policymakers meet in May, up from a probability of just over 50% on Monday.

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At around 1745 GMT, the 10-year US Treasury yield was at 2.377%, after hitting its highest level since 2019. Two-year notes were also higher, reaching 2.1683% from 2.134%.

“The degree of difficulty for the Federal Reserve Bank of Jerome Powell in sustaining a smooth landing for the economy is roughly the same as that of Captain Sullenberger’s emergency landing on the Hudson River,” said Aaron Clark, portfolio manager at GW&K Investment Management in Boston. 2009 An American Airlines plane lands after its engines fail.

“The market continues to be in a tug of war between a policy error causing recession and a resilient economy with a strong consumer and corporate sector,” Clark wrote in an email.

Stocks in Europe also rose. The STOXX 600 Index is up 0.85% after jumping in recent sessions to reach a one-month high (.stoxx). London’s FTSE 100 Index is up 0.5% (.FTSE).

The MSCI World Stock Index, which tracks stocks in 50 countries, is up nearly 1% (.MIWD00000PUS).

The recovery in stocks could be a case for investors buying lower, but growth stocks would suffer if the US 10-year yield approached 2.5%, said Matthias Schipper, global head of multi-asset portfolio management at Allspring Global Investments in London.

“We saw a sharp rise in yields yesterday and we see that continuing today over the longer term, so it will likely put pressure on stocks…it will be difficult for stocks to have a positive performance.”

JPMorgan took a different view and said 80% of its clients plan to increase equity exposure, a record figure.

“With positioning light, sentiment weak, and geopolitical risks likely to subside over time, we believe risks are skewed to the upside,” JPMorgan strategists wrote in a note to clients.

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“We believe investors should add risks in areas that have outgrown the downside such as innovation, technology, biotechnology, emerging markets/China and small stocks. These sectors are pricing in a severe global recession, which, in our view, will not materialize.”

The conflict in Ukraine continued to affect sentiment. US President Joe Biden has issued one of his strongest warnings yet that Russia is considering the use of chemical weapons. Read more

Oil prices initially fell on Tuesday after rising the previous day. But the price of Brent crude was recently at $116.49, up 0.75% on the day. US crude fell 0.04% to $112.07 a barrel. Read more

The US dollar and euro indexes were both flat on Tuesday after Monday’s losses. Read more

Spot gold fell 0.7% to $1,922.04 an ounce, weighed by the Fed Chair’s hawkish approach to tackling inflation. Read more

Cryptocurrency bitcoin is up around 3.7% at around $42,544, extending gains since its intraday low of $34,324 on February 24, when Russia invaded Ukraine. Read more

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Additional reporting by Lawrence Delevingne in Boston and Elizabeth Hawcroft in London; Editing by Jonathan Otis, Matthew Lewis and Leslie Adler

Our criteria: Thomson Reuters Trust Principles.

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