Wall Street sees little movement ahead of Fed minutes: Markets wrap

(Bloomberg) — Wall Street traders avoided making any big bets, with stocks, bonds and the dollar posting small moves ahead of the most anticipated minutes of the Federal Reserve’s latest policy gathering.

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As a result of increased Fed bets, the bulk of recent US rates will be “significant,” according to Ian Lincoln at BMO. He is very skeptical of big hikes at this stage. Evercore’s Krishna Guha said rates have risen sharply — with big moves in longer maturities and tightening in broader financial conditions — reducing the 50 basis-point stimulus.

“It’s like the market is doing some of the work of the central bank,” Guha said.

Despite the recent drumbeat of hawkish Fedspeak, Chairman Jerome Powell hasn’t actually tried to push back against easing monetary conditions. However, since the latest rate decision, both the labor market and inflation figures have come in hotter than expected – over-correcting market expectations. US central bankers will release minutes from Jan. 31-Feb. 1 meeting at 2 pm Washington time.

Read: Fed minutes to show support level for bigger hikes, higher highs

Increasingly stubborn inflation could prompt the central bank to raise interest rates to even higher peak levels and keep them there for the rest of the year, according to economists surveyed by Bloomberg this month.

Forecasters have raised their forecasts for the central bank’s preferred measure of inflation – the personal consumption expenditures price index – every quarter through the first half of next year. The metric now sees 2.4% on an annualized basis by mid-2024, up from 2.3% last month. They see a similar slowdown in reducing the consumer price index.

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Apart from the central bank, traders are also keeping an eye on some corporate highlights.

Intel Corp., the biggest maker of computer processors, cut its dividend to its lowest in 16 years, saving cash for investments in a turnaround effort. S&P 500: Nvidia Corp. Investors will also be keen from one of this year’s top performers in the , which will announce results after the closing hours.

On the longer-term horizon, the relative position of US tech stocks looks bullish even after last year’s brutal sell-off.

The Nasdaq 100 is not far from historic highs against the S&P 500 and is trading near the peak that marked the bursting of the dot-com bubble. The tech-heavy gauge fell 33% last year in the worst fall since the 2008 global financial crisis, but rose 16% in the first weeks of 2023. Meta Platforms Inc. and Tesla Inc. Companies like that fared better than expected.

Geopolitical tensions also receded into the background.

US President Joe Biden said Russian President Vladimir Putin made a “huge mistake” in suspending participation in the New START nuclear deal, his first direct response to the announcement. Biden made brief remarks in Warsaw on Wednesday ahead of a meeting with a group of eastern NATO allies known as the Bucharest Nine.

Highlights of this week:

  • Eurozone CBI, Thursday

  • US GDP, Initial Jobless Claims, Thursday

  • Atlanta Fed President Raphael Bostick speaks Thursday

  • BOJ governor-nominee Kazuo Uida appeared in Japan’s lower house on Friday

  • US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment, Friday

  • Russia’s invasion of Ukraine marked one year on Friday

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Some key movements in the markets:

Shares

  • The S&P 500 was up 0.1% as of 10 a.m. New York time

  • The Nasdaq 100 rose 0.2%

  • The Dow Jones industrial average rose 0.1%

  • The Stoxx Europe 600 fell 0.5%

  • The MSCI world index fell 0.2%

Coins

  • The Bloomberg Dollar Spot Index was little changed

  • The euro was little changed at $1.0654

  • The British pound was little changed at $1.2108

  • The Japanese yen rose 0.4% to 134.51 per dollar

Cryptocurrencies

  • Bitcoin fell 1% to $23,952.94

  • Ether fell 0.8% to $1,628.71

Bonds

  • The yield on 10-year Treasuries fell five basis points to 3.90%.

  • Germany’s 10-year yield was little changed at 2.52%

  • Britain’s 10-year yield fell one basis point to 3.61%

materials

  • West Texas Intermediate crude fell 1% to $75.60 a barrel.

  • Gold futures rose 0.1% to $1,844.60 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from John-Patrick Barnert, Wildana Hajrik, and Angel Adegbeson.

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