{"id":1811,"date":"2023-10-14T18:24:54","date_gmt":"2023-10-14T18:24:54","guid":{"rendered":"https:\/\/infundpros.com\/markets\/stock-market-ends-losing-streak-why-you-can-thank-the-fed\/"},"modified":"2023-10-14T18:24:55","modified_gmt":"2023-10-14T18:24:55","slug":"stock-market-ends-losing-streak-why-you-can-thank-the-fed","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=1811","title":{"rendered":"Stock Market Ends Losing Streak. Why You Can Thank the Fed."},"content":{"rendered":"
\n
<\/p>\n

<\/p>\n

<\/p>\n<\/figure><\/div>\n

Don\u2019t look now. The Fed may be pivoting. <\/p>\n

It isn\u2019t elegant, graceful, or refined. And it apparently contradicts the past 10 days\u2019 employment and inflation data, which would seem to support an increase in the federal-funds rate in November or December. But Federal Reserve officials have gone out of their way to talk down the likelihood of another hike, largely because the bond market has been doing the central bank\u2019s work for it.<\/p>\n

\n

The inverse relationship between bond yields and stock prices held firm this past week. After a relentless rise since the late summer to a nearly 5% yield on the 10-year U.S. Treasury note\u2014and several losing weeks in a row for major stock indexes\u2014yields reversed and stocks bounced.<\/p>\n

The
\n S&P 500 index
\n ended the week up 0.45%, the
\n Dow Jones Industrial Average
\n added 0.79%, and the
\n Nasdaq Composite
\n slipped 0.18%. The 10-year yield fell 0.16 point, to 4.63%.<\/p>\n

The catalyst for the reversal was a parade of Fed speakers acknowledging that the surge in bond yields had resulted in tighter financial conditions\u2014raising borrowing costs for business, consumers, and the U.S. government.<\/p>\n

\u201cI will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy,\u201d Fed Vice Chair Philip Jefferson said on Monday, while Dallas Fed President Lorie Logan echoed that sentiment in separate remarks that same day. Atlanta Fed President Raphael Bostic cut straight to the point on Tuesday morning. \u201cI don\u2019t think we need to increase rates anymore,\u201d he said. It doesn\u2019t get any clearer than that. <\/p>\n

It makes a lot of sense. Higher bond yields should slow the economy, dampening inflation, the thinking goes. And as the inflation rate declines, the real, or inflation-adjusted, fed-funds rate will effectively increase even if the Fed doesn\u2019t raise its target.<\/p>\n

\u201cFed officials are going out of their way to send a message that they\u2019re done for now,\u201d says Tom Porcelli, chief U.S. economist at PGIM Fixed Income. <\/p>\n

The market, too, is coming around to that point of view. Interest-rate futures pricing now implies a less than one-in-three chance of an additional fed-funds increase this year, according to the CME FedWatch Tool, down from roughly 50\/50 odds a few weeks ago. But that doesn\u2019t mean they\u2019ll come down quickly, either, even if the market is pricing in cuts of 0.75 percentage point next year. \u201cThe higher-for-longer idea is real,\u201d Porcelli says.<\/p>\n

That\u2019s probably for the best. Faster Fed cuts than now expected in 2024 would require a worse economic outcome that would hurt earnings\u2014and the stock market.<\/p>\n

It\u2019s far from an all-clear signal, but a Fed that\u2019s conscious of the bond market\u2019s tightening effect is better than one that isn\u2019t. Maybe a soft landing is possible after all. <\/p>\n

Write to <\/strong>Nicholas Jasinski at nicholas.jasinski@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Don\u2019t look now. The Fed may be pivoting. It isn\u2019t elegant, graceful, or refined. And it apparently contradicts the past 10 days\u2019…<\/p>\n","protected":false},"author":1,"featured_media":1812,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":{"0":"post-1811","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets"},"yoast_head":"\nStock Market Ends Losing Streak. Why You Can Thank the Fed. | inFundPros<\/title>\n<meta name=\"description\" content=\"Don\u2019t look now. The Fed may be pivoting. It isn\u2019t elegant, graceful, or refined. 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