(Bloomberg) — Stocks rose and Treasury two-year yields hit the lowest since May as an unexpected decline in producer prices reinforced bets on Federal Reserve rate cuts this year.
While traders continued to expect the first rate reduction in May, they now see a slightly bigger chance of a cut in March. The data came just a day after a hotter-than-anticipated reading on consumer prices — underscoring the bumpy path officials face in bringing inflation back to the 2% target. Wall Street also sifted through a raft of bank results as Corporate America’s earnings season got underway. Geopolitical risks also captured investors’ attention.
“We suspect there is little to dissuade the market from pressing the March cut trade, and wouldn’t fade the move ahead of the weekend,” said Ben Jeffery at BMO Capital Markets. “Let us not forget the geopolitical escalations in the Red Sea and the implied headline risk — relevant from both a flight to quality and supply side inflation perspective.”
Two-year US yields fell nine basis points to 4.16%. The S&P 500 extended its weekly advance. Oil jumped as the US and its allies launched airstrikes against Houthi rebels in Yemen, retaliating for attacks on ships in the Red Sea that have imperiled flows of fuel and goods through the vital waterway.
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This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher.
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