U.S. stocks extended gains in Friday’s intraday action, with major indices on track to end the week in the green, while yields cooled off following a report that the Federal Reserve could be losing some hawkish fervor.
A Wall Street Journal story, whose author is known to be closely briefed on FOMC thinking, said there may be talks on slowing rate hikes at the next meeting.
San Francisco Fed President Mary Daly said while more rate hikes are needed, “the time is now to start talking about stepping down”.
“The FOMC has progressively lost patience waiting for inflation data to improve. For the FOMC to pause, they need signs that inflation is improving, inflation expectations remain well anchored, and measures that imply spread or persistence in inflation data like the Dallas Fed’s trimmed mean PCE measure, behave too,” UBS wrote in a note.
The benchmark S&P 500 (SP500) is +1.88%, the Dow (DJI) is +1.95% and the Nasdaq Composite (COMP.IND) is +1.70%.
Nine of 11 S&P sectors traded higher, led by material and energy stocks – buoyed by strong earnings from Freeport-McMoRan and Schlumberger. But communication service stocks, including Meta and Alphabet, took a beating after Snap’s disappointing earnings report.
Yields also reversed course. The 10-year Treasury yield (US10Y) is down 5 basis points at 4.21%. The 2-year yield (US2Y) is 14 basis points lower at 4.49%. The dollar index (DXY) lost most of its gains.
The 10-year yield reached levels not seen since the Financial Crisis on Thursday, and ING believes there is little in the way of it moving to 4.5%.
On the economic front, the U.S. govt.’s Sept. deficit ballooned, driven by the Biden administration’s student loan forgiveness program.
Moving to individual stocks, Twitter pared losses after the White House said it was unaware of any security investigation into its buyout.
Meanwhile, Schlumberger topped S&P gainers after earnings topped Street view on ramped up drilling activity. SVB Financial was the biggest decliner after the firm issued weak NII growth outlook.
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