Dow fell 130, decliners modestly ahead of & NAZ declined 140. The MLP index went up 2+ to the 228s & the REIT index was even in the 371s. Junk bond funds were lower & Treasuries saw selling, raising yields (more below). Oil slid lower in the 87s & gold was steady at 1644.
AMJ (Alerian MLP index tracking fund)
Federal Reserve officials are expected to maintain their hawkish stance at the policy-setting meeting where they are likely to approve another super-sized interest rate hike, paving the way for borrowing costs to climb above 5% by Mar 2023. The survey found that most respondents expect the Fed to raise rates by 75 basis points for a 4th straight meeting. The Federal Open Market Committee will announce their decision following a 2-day meeting on tomorrow & Wed. A basis point is one hundredth of 1%. The central bank will then approve a 50 basis point increase in Dec, followed by 25 basis point increases at the following 2 meetings in Feb & Mar. The rapid tightening of policy is likely to trigger a US & global recession. Traders are pricing in a more than 80% chance of another 75 basis point hike at the conclusion of the Fed's 2-day meeting next week, according to the CME Group's FedWatch tool, which tracks trading. Only 18% think the Fed will go with a ½-point hike instead. The Fed has taken no action to dissuade that expectation. Officials may also take steps to push rates even higher than they had expected as recently as Sep as elevated inflation persists despite higher interest rates. The central bank had projected a peak rate of 4.6% next year, but that could increase depending on forthcoming economic data.
Fed expected to aggressively hike rates to 5%, triggering global recession: survey
Treasury yields rose as markets looked ahead to the Federal Reserve's Nov meeting, due to begin tomorrow. The 10-year Treasury yield was up by more than 4 basis points to 4.05% & the yield on the policy-sensitive 2-year Treasury rose by around 7 basis points to 4.497%. Yields & prices have an inverted relationship. Traders are widely expecting the Federal Reserve to hike interest
rates by 75 basis points this week. This would be the 6th rate hike of
the year, which has been dominated by the central bank's efforts to
curb high inflation. Markets are also hoping to gain some clarity
about the Federal Reserve's future policy pathway from the meeting, as
questions about how high rates will be hiked in late 2022 & throughout
2023 have grown louder. There are concerns that rate hikes are dragging
the economy into a recession while economic data has been sending
mixed signals about inflation.
U.S. Treasury yields climb as investors look toward November Fed meeting
Euro zone inflation rose above the 10% level in the month of Oct, highlighting the severity of the cost-of-living crisis in the region & adding more pressure on the ECB. Preliminary data from Europe's statistics office showed headline inflation came in at an annual 10.7% this month. This represents the highest ever monthly reading since the euro zone's formation. The 19-member bloc has faced higher prices, particularly on energy & food, for the past 12 months. But the increases have been accentuated by Russia's invasion of Ukraine in late Feb. This proved to be the case once again, with energy costs expected to have had the highest annual rise in Oct, at 41.9% from 40.7% in Sep. Food, alcohol & tobacco prices also climbed in the same period, jumping 13.1% from 11.8% in the previous month. Today's data comes after individual countries reported flash estimates last week. In Italy, headline inflation came in above expectations at 12.8% year on year. Germany also said inflation jumped to 11.6% & in France the number reached 7.1%. The different values reflect measures taken by national govs, as well as the level of dependency that their nations have, or had, on Russian hydrocarbons.
Euro zone inflation hits record high of 10.7% as growth slows sharply
Dow Jones Industrials
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