Wall Street ended a negative streak and closed with profits again

Shares rose on Thursday and recorded their first profit in three days on Wall Street. The S&P 500 rose 0.7% after erasing an early morning loss. The Dow Jones Industrial Average rose 1%, while the Nasdaq Composite rose 0.7%.

The shares immediately went from losses to gains after a Federal Reserve official made comments that hopes have risen that the central bank will not step up its fight against inflation as aggressively as feared. This contradicted recent statements by other officials, who worried about a much larger rise in interest rates after several economic reports more bullish than expected.

Raphael BosticPresident of the Federal Reserve Bank of Atlanta, told reporters that, for now, he still favors raising the Federal Reserve’s overnight interest rate to a range between 5% and 5%. .25%, against 4.50% and 4.75% currently. . This figure is lower than the forecasts of a good part of the investors of Wall Street.

“That’s what’s given the market some hope, that there’s a voice that’s not saying you need to raise” the forecast for when the Fed will finally stop raising rates, a- he declared. Brent Schuttechief investment officer at Northwestern Mutual Wealth, “because a lot of the others who talk seem to be saying all the time: ‘Elevator’ “.

Higher rates may reduce the inflation because they slow down the economy, but also increase the risk of recession. They also hurt stock prices and other investments.

“That’s where we are now,” Schutte said. “We make a policy based on each month’s data, and the market moves based on that, instead of paying attention to the trend. And these things are reviewed. That’s why it’s so volatile.”

The mood was more dark the morning after a report showed that fewer workers They applied for unemployment benefits last week for the third week in a row. These are the latest data that show that the labor market is still very stronger than expectedeven as the Federal Reserve raised interest rates at the fastest rate in decades.

While this is good news for workers and allays fears of a near-term recession, there are concerns that an overly strong labor market could add upward pressure on inflation. Inflation has recently been more reluctant to ease than expected, having eased from its peak in the summer.

On Thursday, a separate report showed that the labor costs were higher than previously reported for the last three months of 2022, while productivity was revised down. These two data could increase the pressure on inflation. This report follows others released last month that show that overall job growth, consumer spending and inflation at various levels of the economy remain above expectations.

“The economy is in pretty good shape and from a spending perspective, that’s going a long way to supporting higher earnings estimates,” said Brad McMillan, chief investment officer at Commonwealth Financial Network. “But the flip side is that the Federal Reserve sees it too, and the market sees that the Federal Reserve sees it.”

Strong economic reports forced Wall Street to raise its forecast for how much the Federal Reserve will eventually raise interest rates. It also means a delay in any hope of further rate cuts.

The change was clear in the bond market, where Treasury yields soared. The yield on the 10-year Treasury note fell from 4.00% on Wednesday to 4.07% and from less than 3.40% at the start of the year. It helps set interest rates on mortgages and other loans that drive the economy, and is near its highest level since November. The two-year yield, which is moving more in line with Fed expectations, rose from 4.88% to 4.90% and is close to its highest level since 2007.

Earnings forecasts for major US corporations have recently fallen as inflation and interest rates remain high. However, several of them rose on Thursday with Salesforce after posting encouraging results.

Abroad, stock markets traded mixed.

New data from Europe showed on Thursday that inflation fell slightly in the 20 countries that use the euro, but remained higher than economists had expected.

(With AP information)

Continue reading: