March 22, 2018

As Wall Street Boosts Rate Hike Bets, Fed Doubts Remain

22 February 2018, 10:23 | Virginia Santiago

As Wall Street Boosts Rate Hike Bets, Fed Doubts Remain

Stock Futures Higher Despite Interest Rate Concerns

If the Fed moves three times by its September meeting, its benchmark rate will be positive after adjusting for inflation for the first time in more than a decade, prompting the central bank to pause quarterly rate rises and see how the economy is responding, said Ellen Zentner, chief USA economist at Morgan Stanley, in a client note Tuesday.

U.S. bond yields are spiking again and stocks don't like it one bit, mirroring the price action seen at the start of February when volatility began to spike.

"The return of China will be closely watched for any renewed physical interest in Asia to stem the weakness", MKS said in a note, adding that the firm dollar and higher Treasury yields were likely to keep the metal under pressure.

US stocks dropped after the Fed minutes were released despite a brief initial rally.

The euro has been driven by dollar weakness and then the recent recovery, but investors remain long on the common currency in anticipation the European Central Bank will soon begin unwinding its balance sheet.

US Federal Reserve officials have become more confident about the growth and inflation outlook, paving the way for gradual interest rate hikes in the future.

Investors also took stock of the latest developments in the Broadcom-Qualcomm takeover saga.

Qualcomm fell 1.05 percent after Broadcom lowered its takeover offer for the chipmaker.

Fed policy makers still due to speak include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic.

New Pa. congressional map now on Governor Wolf's desk for review
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The Nasdaq Composite Index added 0.2 percent.

The Russell 2000 index of smaller-company stocks shed most of its gains from earlier in the day.

The MSCI Asia Pacific Index declined 0.9 percent to the lowest in more than a week on the largest drop in nearly two weeks.

"The fact that there wasn't a big surprise or revelation was likely calming to the market".

The Dow Jones industrial average climbed 75 points, or 0.3 percent, to 25,037.

The initial reaction to the minutes' release saw the Dow go up as much as three hundred points, but as investors digested the news, the market tanked and finished in negative territory on the close.

The MSCI Emerging Markets Currency Index sank 0.4 percent to the lowest in more than a week on the largest decrease in two weeks.

The prospect of higher rates and an unexpected fall in January U.S. existing home sales dented the real estate sector, off 0.54 percent. Crude oil gained a touch, gold fell and Treasury bonds were hit hard, pushing the 10-year yield to 2.94% - closing in on the 3% threshold that hasn't been crossed in seven years.

Palladium was down 0.1% at $1,019.25/oz and platinum was up 0.2% at $989.40/oz after touching a more than one-week low of $983.

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