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This month’s swings in yields have also come as traders recalibrate their expectations for when the Federal Reserve could begin cutting its main interest rate, which is at its highest level in more than two decades.
Wall Street always yearns for cuts to rates because they can boost prices for investments and remove downward pressure on the economy. But traders have had to delay their too-optimistic forecasts for rate cuts several times this year because inflation has remained stubbornly high.
The Fed is trying to pull off the balancing act of grinding down on the economy just enough through high interest rates to get inflation fully under control, but not so much that it leads to widespread layoffs.
A report from the Fed released Wednesday said that it’s heard from businesses and other contacts around the country that consumers are pushing back against more increases to prices. That in turn is eating into companies’ profits as their own costs for insurance and other expenses continue to rise.
Despite worries about cracks showing in spending by US consumers, particularly those making lower incomes, economists at BNP Paribas expect a healthy job market, slowing inflation and even gains made by some investors in cryptocurrencies to help support the main engine of the economy.
“The US consumer has defied the gravity of high interest rates and inflation,” as well as jitters about an uncertain economy, according to Yelena Shulyatyeva, senior US economist at BNP Paribas.
US stocks have been continuing to set records despite worries about interest rates staying high in part because stocks related to artificial-intelligence technology keep rising. Nvidia’s latest blowout profit report helped drive the frenzy even higher. After briefly dipping in morning trading, it rose 0.8 per cent Thursday for its most modest gain since its profit report..
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On the winning side of Wall Street was Dick’s Sporting Goods, which jumped 15.9 per cent after topping analysts’ expectations for profit and revenue in the latest quarter. The retailer also raised its forecast for profit over the full year.
Chewy, an online seller of pet supplies, likewise reported stronger profit for the latest quarter than expected, and its stock jumped 27.1 per cent. The company plans to return up to $US500 million to its shareholders by buying back its own stock.
In stock markets abroad, indexes were mostly lower across Asia and Europe. Hong Kong’s Hang Seng fell 1.8 per cent, South Korea’s Kospi dropped 1.7 per cent and France’s CAC 40 fell 1.5 per cent.
Stocks in Shanghai were roughly flat after the International Monetary Fund raised its forecast for China’s economic outlook, saying it expects the No. 2 economy to grow at a 5 per cent annual pace this year. But it also warned that consumer-friendly reforms are needed to sustain strong, high-quality growth.
AP
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