The dollar dropped and Wall Street indexes retreated on Friday as the U.S. Federal Reserve’s preferred inflation reading indicated lowering prices in line with December forecasts, while MSCI’s global stock index was marginally higher.
Following statistics that suggested the Fed might be able to orchestrate a soft landing for the US economy, Treasury yields increased.
Following an unrevised 0.1% decline in November, the personal consumption expenditures (PCE) price index grew by 0.2% last month, according to the Bureau of Economic Analysis of the Commerce Department.
“I think this gives the Fed cover to say what it’s been saying, which is, hey, we have to be data-driven and I don’t know that we’re seeing much that would point towards a lower interest rate. They (the Fed) are not going to do anything if the data tells them to stay,” averred Kim Forrest, chief investment officer at Bokeh Capital Partners, Pittsburgh.
“But I also don’t see anything that’s pointing to a higher interest rate, and that’s good enough for now.”
With a gain of 0.14%, the MSCI world equity index, which monitors stocks in 49 countries, reached a level not seen in nearly two years.
On Wall Street, the S&P 500 was up 4.11 points, or 0.08%, to 4,898.27, the Nasdaq Composite was down 8.26 points, or 0.05%, to 15,502.24, and the Dow Jones Industrial Average was up 88.80 points, or 0.23%, to 38,137.93 at 10:31 a.m.
The dollar index, which compares the value of the US dollar to a basket of the currencies of other significant trading partners, down 0.12% throughout the day.
The euro was up 0.1% at $1.0856 while the dollar increased 0.31% versus the JPY to 148.11.
Following the data, trade in Treasury notes was erratic; but, as of Thursday, the yield on benchmark 10-year Treasury notes increased to 4.1624% from its U.S. close of 4.132%. In contrast to the U.S. closing of 4.314%, the two-year yield, which rises in tandem with traders’ forecasts of increasing Fed fund rates, reaching 4.3551%.
A BofA Global Research analysis released on Friday calculated that in the week leading up to Wednesday, investors invested about $12 billion in Chinese equities funds. That represents the second-biggest inflow ever and the largest since 2015.
