Stocks push higher amid bets on slower Fed hikes: markets wrap

Stocks rose in Asia on Thursday and the dollar fell as the prospect of a slower pace of Federal Reserve monetary tightening filtered across global markets.

An Asian share gauge added about 1%, but the gains were smaller than Wednesday’s 2.6% surge in the S&P 500 and 4.3% jump in the Nasdaq 100. A dip in futures suggested the US rally could stall when Wall Street reopens.

The Fed raised rates by 75 basis points for a second month, saying such a move is possible again and reiterating its desire to curb inflation. Chair Jerome Powell added the pace of hikes will slow at some point and policy will be set meeting-by-meeting. That shift comes amid signs of an economic slowdown.

Treasuries were little changed, with the 10-year yield at 2.79%. Swaps tied to the date of Fed policy meetings imply a 3.3% peak for the fed funds rate around year-end  — not much higher than the current range of 2.25% to 2.5%.

The yen strengthened about 1% against the dollar in the fallout from the Fed decision. Oil advanced past $98 a barrel. Gold and Bitcoin edged up.

The knee-jerk relief in markets on possible crumbs of comfort from the Fed outlook echoes a pattern seen after earlier hikes. Those bouts of optimism stumbled on recession risks from a global wave of monetary tightening, Europe’s energy woes and China’s property sector and Covid challenges.

“We do feel the hikes are going to slow from these levels,” Laura Fitzsimmons, JPMorgan Australia’s executive director of macro sales, said on Bloomberg Television. But financial-industry participants are skeptical about the pricing indicating Fed rate cuts in 2023, she added.

Former New York Fed President Bill Dudley said markets are underestimating just how far the Fed will go to tame decades-high inflation. The next key data are US growth and a read on cost pressures. The nation is seen avoiding a technical recession amid a moderation in the core PCE deflator.

The Fed can’t “downshift gears too much” in part because core inflation is poised to decline at a “glacially slow pace,” Seema Shah, chief global strategist at Principal Global Investors, wrote in a note. She expects the Fed to lift borrowing costs above 4% next year.

The latest US earnings were mixed. Facebook parent Meta Platforms Inc. posted its first ever quarterly sales decline, but Ford Motor Co.’s performance beat estimates. US and European firms worth more than $9.4 trillion will report their results on Thursday.

Elsewhere, traders are awaiting a phone call between President Joe Biden and China’s Xi Jinping, which could touch on US tariffs and other points of tension.

Here are some key events to watch this week:

• Apple, Amazon earnings, Thursday
• US GDP, Thursday
• Euro-area CPI, Friday
• US PCE deflator, personal income, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.2% as of 7 a.m. in London. The S&P 500 rose 2.6%
• Nasdaq 100 futures fell 0.4%. The Nasdaq 100 advanced 4.3%
• Japan’s Topix index added 0.2%
• Australia’s S&P/ASX 200 index climbed 1%
• South Korea’s Kospi index added 0.8%
• China’s Shanghai Composite Index rose 0.3%
• Hong Kong’s Hang Seng Index was down 0.3%
• Euro Stoxx 50 futures increased 0.6%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro was at $1.0224, up 0.3%
• The Japanese yen was at 135.31 per dollar, up 0.9%
• The offshore yuan was at 6.7435 per dollar

Bonds

• The yield on 10-year Treasuries was at 2.79%
• Australia’s 10-year bond yield dropped four basis points to 3.21%

Commodities

• West Texas Intermediate crude was at $98.53 a barrel, up 1.3%
• Gold was at $1 738.21 an ounce, up 0.3%