| | | Stocks Soar On Speculation Fed Rate Hikes May Ending ...
The S&P 500 Index ( $SPX) ( SPY) today is up +1.06%, the Dow Jones Industrials Index ( $DOWI) ( DIA) is up +0.82%, and the Nasdaq 100 Index ( $IUXX) ( QQQ) is up +1.54%.
Stocks this morning rallied, with the S&P 500 at a 14-1/2 month high, the Dow Jones Industrials at a 3-1/2 week high, and the Nasdaq 100 at a 17-month high. Speculation the Fed may be nearing the end of its interest rate hiking campaign is fueling gains in stocks today after U.S. June consumer prices slowed more than expected. While today’s CPI report is unlikely to dissuade the Fed from raising interest rates by +25 bp later this month, it increases the chances that this month’s rate hike could be the last in this cycle.
The June U.S. CPI eased to +3.0% y/y from +4.0% y/y in May, better than expectations of +3.1% y/y and the smallest increase in 2-1/4 years. Also, the June CPI ex-food and energy eased to +4.8% y/y from +5.3% y/y in May, better than expectations of +5.0% y/y and the smallest increase in 1-1/2 years.
Richmond Fed President Barkin said even though U.S. inflation slowed in June, "it is still too high. Our target is 2%. If you back off too soon, inflation comes back strong, which then requires the Fed to do even more."
The markets are discounting the odds at 89% for a +25 bp rate hike at the next FOMC meeting on July 25-26. The markets are anticipating a peak funds rate of 5.42% by November, which is +34 bp higher than the current effective federal funds rate of 5.08%.
Global bond yields are lower. The 10-year T-note yield is down -9.3 bp at 3.877%. The 10-year German bund yield is down -6.7 bp at 2.583%. The 10-year UK Gilt yield is down -14.2 bp at 4.520%.
Overseas stock markets are mixed. The Euro Stoxx 50 is up +1.80%. China’s Shanghai Composite Index today closed down -0.78%. Japan’s Nikkei Stock Index today closed down -0.81% ....
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