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Last week, though, investors took comments from the Fed’s Powell to indicate the central bank’s hikes to interest rates may be done. He said the summer’s jump in Treasury yields could substitute for further hikes to rates if they remain persistent. That triggered a sharp easing in Treasury yields, which in turn helped stocks to rally.
But Powell reiterated Thursday that no decision has been made yet. Even though some recent data reports have been encouraging, he made pains to say, “Inflation has given us a few headfakes.” He said the Fed will continue to move carefully, trying not to be “misled by a few good months of data,” while aware of the risks of hiking rates too far and driving the economy into a painful recession.
That cooled some of the enthusiasm that had built on Wall Street as traders moved up their forecasts for when the Federal Reserve could begin cutting rates. Many are betting on rate cuts to begin by summer, according to data from CME Group.
Some economists have already been trimming their forecasts for how deeply the Fed may ultimately cut, saying the central bank will likely keep rates higher than they were before COVID.
At Goldman Sachs, for example, economist David Mericle says the Fed could begin cutting rates during the last three months of 2024. But he sees the Fed cutting its federal funds rate only to a range of 3.50 per cent to 3.75 per cent from its current range of 5.25 per cent to 5.50 per cent.
Earlier, Mericle thought the Fed could bring it down as low as 3 per cent to 3.25 per cent, but he said the US government’s big, persistent deficits and other factors will likely keep rates higher.
The worries about rates overshadowed some more profit reports for the summer from big US companies that came in better than expected.
The Walt Disney Co. was strong after joining the growing list of companies topping forecasts. It rose 6.5 per cent after saying it added more Disney+ streaming subscribers than Wall Street had forecast, while also increasing its target for annual cost savings.
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Tapestry climbed 4 per cent for another one of the bigger gains in the S&P 500 after the maker of high-end shoes and handbags beat Wall Street’s profit forecast
On the opposite end was Becton Dickinson, which sank 8.8 per cent. The maker of medical equipment reported profit for the summer that matched Wall Street’s expectations, but its financial forecasts for its upcoming fiscal year fell short of some analysts’ estimates.
Topgolf Callaway Brands was another weight on the market and sank 16.3 per cent despite beating analysts’ expectations for profit during the summer. It cut its forecasts for full-year revenue and profit, in part because of weakening trends at its Topgolf entertainment venues outside of newly opened ones.
In the oil market, crude prices regained some of their big losses from earlier in the week. A barrel of US crude added 41 cents to settle at $US75.74, and Brent crude, the international standard, gained 47 cents to $US80.01 per barrel. Both, though, remain down roughly 6 per cent for the week so far amid worries about supplies outstripping demand.
In stock markets abroad, indexes were mostly higher across Europe and Asia.
Japan’s Nikkei 225 rose 1.5 per cent after Prime Minister Fumio Kishida told local reporters he had decided against calling an election before the end of the year.
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