News from the Financial Associated Press, February 7 (edited by Xiaoxiang)With the strong non-agricultural employment data released last Friday, which greatly increased the possibility of further interest rate hikes by the Federal Reserve, the US stock and bond market was still “bleeding” on Monday (February 6). At the same time, the pricing of interest rates in the financial market continues to undergo earth-shaking changes. After the Federal Reserve announced a 25 basis point rate hike last week, industry insiders do not even rule out the possibility that it will raise interest rates three more times within this year…
Market data shows that the three major U.S. stock indexes fell across the board overnight, and the Nasdaq Composite Index, which is dominated by technology stocks, fell by more than 1%.As of the close, the S & P 500 index fell 25.40 points, or 0.6%, to 4111.08 points, after falling 1% on Friday. The Dow Jones Industrial Average fell 34.99 points, or 0.1%, to 33,891.02. The Nasdaq fell 119.50 points, or 1%, to 11887.45.
U.S. Treasury bonds were also sold off again on Monday, with yields on U.S. Treasury bonds of various maturities generally seeing double-digit basis point gains.Among them, the 2-year U.S. bond yield rose 19.2 basis points to 4.307%, the 5-year U.S. bond yield rose 17.3 basis points to 3.665%, the 10-year U.S. bond yield rose 13 basis points to 3.529%, and the 30-year U.S. bond yield rose 13 basis points to 3.529%. U.S. bond yields rose 6.6 basis points to 3.615%.
The U.S. stock and bond market has plunged all the way since last Friday’s non-farm payrolls data, as last Friday’s unexpectedly strong U.S. non-farm payrolls report suggested that the Fed may feel the need to continue raising interest rates to curb rising wages and inflation, and then Keep interest rates stable for a long period of time. The report showed that the U.S. added a staggering 517,000 jobs in January, well above economists’ expectations of fewer than 200,000.
Standard Chartered Bank (LON:)( Standard Chartered ) strategist Steve Englander said that “the US employment data was shocking” and the number of new jobs “made it more likely that the Fed will continue to raise interest rates.”
Edward Smith, co-chief investment officer of Rathbones, also said, “The theme that drove the market earlier this year seemed to be that people expected fewer rate hikes, or some sizable rate cuts after rates peaked. But the sell-off of the past few days may It suggests that people may be starting to realize that the market has been carried away, especially when it comes to interest rates.”
Could the Fed hike rates three more times?
With stocks retreating from overbought levels in the past two days, U.S. Treasuries have clearly taken a hit after posting their best start to a cross-asset return since 1987. In just two days, interest rate markets have shifted from earlier skepticism of the Fed’s rate hikes to one that is almost entirely in line with the Fed’s forecast that rates will peak above 5% later this year.
At present, the swap market’s expectations for the peak rate of the Fed’s interest rate have soared to 5.1%, which is consistent with the forecast of the Fed’s December interest rate dot map.
The market even believes that the Fed will not even rule out the possibility of raising interest rates three times in the first half of this year.The latest rate pricing suggests that another 25 basis point hike by the Fed at its next meeting in March is all but certain. Furthermore, the odds of a 25 basis point rate hike by the Fed in May hit 73%, and even the odds of a rate hike in June shot up to 36% — you know,That expectation was at one point close to zero earlier this month.
The influx of bets on a June rate hike could be described as a significant shift. Because if the Fed continues to raise interest rates in the next three meetings, the target range of the federal funds rate will be further raised to 5.25%-5.50%. In the December rate dot plot, only seven of 19 Fed officials thought rates would peak at or above that level.
A worrying phenomenon is that some Fed officials have begun to create momentum for the peak interest rate may eventually exceed expectations. The president of the Atlanta Fed, Bostic, once again “hawked” on Monday, saying that the strong employment report in January made it more likely that the Fed will need to continue to raise interest rates, and the peak of interest rates may exceed the level previously expected by policymakers.
If the better-than-expected economic situation persists, “it could mean we need to do a lot more work,” he said in an interview. “I expect that will cause us to raise interest rates more than I currently expect.”
Fed Chairman Powell will make another appearance tonight
Looking ahead, the market will undoubtedly focus closely on the latest statement from Federal Reserve Chairman Jerome Powell. Powell will participate in a discussion at the Economic Club of Washington at 1:40 a.m. Beijing time on Wednesday, which will be his second public appearance after a lapse of a week.Investors are expected to carefully read his speech for clues about the Fed’s reaction to the jobs data.
Chris Senyek, chief investment strategist at Wolfe Research, said, “Fed Chairman Powell is a big uncertainty every time he speaks. Investors will see whether he will return to the relatively dovish tone last Wednesday, especially on financial conditions and On the deflationary course in the U.S. We still think the Fed will be raising rates for a longer period of time.”
FXStreet analyst Dhwani Mehta also pointed out that the speech of Fed Chairman Powell will be the focus on Tuesday. His comments on the future path of policy could drive fresh dollar trade. Anil Panchal, an analyst at the agency, believes the dollar index could extend its latest recovery if Fed Chairman Jerome Powell praises recent hawkish signals in U.S. data.
Federal Reserve Chairman Jerome Powell said at a news conference after last week’s rate-setting meeting that the Fed is committed to tightening policy further until inflation falls significantly, which would require a broader cooling of demand across the economy. Powell said the Fed expected to raise rates “several times” before keeping them on hold for the rest of the year.