Wall Street’s interest rates party might be a bit premature

At last there’s a glimmer of good news from an inflation front in the US that for much of this year looked threatening.

The S&P 500 index rose 1.2 per cent, posting a record in the process. The tech-heavy and more rate-sensitive Nasdaq index jumped 1.4 per cent and bond yields fell. The inflation data came alongside retail sales numbers that were quite flat and after recent jobs and wage data that showed some weakening of the US employment market .

The Fed’s chair, Jerome Powell, said earlier this week that the bank would maintain rates at their 20-year highs. While he expected the inflation rate to fall he was less confident than he had been about the outlook. He also said, however, that on the available data he thought it unlikely that the Fed’s next move would be a rate hike.“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” he said.

Jerome Powell has said he didn’t think it was likely the Fed would need to consider interest rate increases.Equity and bond investors, however, were less concerned about what might occur than relieved by the first evidence, albeit only one piece of it, that the inflation rate isn’t starting to surge again.The meme stock mania that developed this week seems to be fizzling out, with heavy falls in the prices of stocks like GameStop, AMC and Blackberry that had soared earlier in the week.

Source: Loan Digest (loandigest.net)

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