Stocks, Bond Yields and U.S. Dollar Advance

Barry Adams
19 Sep, 2022
New York City

Stocks on Wall Street managed to rise above the morning doldrums and benchmark indexes eked out gains at close. 

The Federal Reserve Bank's policy committee is set to announce its rate decision this Wednesday and investors are expecting a rate hike between 50 and 75 basis points. 

The yield on 2-year Treasury notes rose to 3.95%, 10-year Treasury notes jumped to 3.49% and 30-year bonds increased to 3.51%.  

The 10-year Treasury yield closed at a 11-year high. 

U.S. interest rates are expected to rise for the foreseeable future as the consumer price inflation is running above 8% and the inflation has stayed ahead of the Fed's target rate of 2% for nearly 24 months.  

Moreover, 13 central banks are scheduled to announce their rate decision this week as interest rates are expected to rise around the world. 

Last Friday, Russia lowered its key lending rate by 50 basis points, matching expectations. 

The People's Bank of China lowered its reverse repo rate for 14-day lending to 2.15% from 2.25% on Monday. 

The central  bank lowered its key lending rate to provide more liquidity in the financial system and spurred banks to increase lending in the housing, steel, and construction related industries. 

 

Wall Street Advances 

On Wall Street, stocks were in a holding pattern ahead of the Fed's decision on Wednesday and investors await more insights from policymakers. 

The S&P 500 index advanced 0.7% or 26.56 points to 3,899.80 and the Nasdaq Composite index increased 0.8% or 86.62 points to 11,535.02. 

Future price of the immediate-month  delivery of crude oil edged up 33 cents to $85.56 a barrel and natural gas inched up 13 cents to $7.89 a thermal unit. 

More than 400 stocks hit their 52-week lows including Ciena Corp, Church & Dwight, Fidelity National Information Services, GAMCO, Garmin, Korn Ferry,  Microsoft, PerkinElmer, Teradata and WeWork.  

Autozone Inc declined 2.4% to 2,114.2 after the specialty retailer said same store sales in the fiscal fourth quarter ending on August 27 increased 6.2%. 

Revenues in the quarter increased 8.9% to $5.4 billion from $4.9 billion a year ago and the retailer repurchased its own stock worth $1 billion in the quarter. 

Ralph Lauren Corp increased 2.4% to $95.72 after the company reiterated its fiscal 2023 outlook issued on August 9th. 

Wix.com Ltd jumped 13% to $83.27 after activist investor Starboard Value controls 9% stake in the web site development company. 

 

Mixed Closing On European Bourses 

Benchmark indexes in Europe traded mixed on the first day of the week after falling 3% in the previous week. 

Investors are bracing for rate decisions from at least 13 central banks this week including policy insights from the U.S., Switzerland, China, Japan and the U.K. 

U.S. rates are expected to rise for the foreseeable future as the consumer price inflation is running above 8% and the inflation has stayed ahead of the Fed's target rate of 2% for nearly 24 months.  

The Bank of England, The Swiss National Bank and The Bank of Japan are set to release their rate decisions on Thursday. 

Bond yields rose across the eurozone and Europe. 

The yield on 10-year bonds of Germany rose to 1.79%, the U.K. inched up to 3.16%, France advanced to 2.33%, Italy increased to 4.07% but Switzerland edged down to 1.1%.  

The DAX index inched up 0.5% to 12,803.24, the CAC-40 index fell 0.3% to 6,059.70 and the FTSE 100 index dropped 0.6% to 7,236.68. 

The dollar rose against all European currencies ahead of the key U.S. rate decision on Wednesday. 

The euro traded down to $0.99 and the British pound fell to a nearly a 4-decade low to $1.137. 

Brent crude oil edged up 5 cents to $91.37 a barrel and TTF natural gas prices dropped to a 2-month low of 175.06 euros a megawatt hours. 

Stocks on European bourses generally traded sideways but with a downward bias. 

 

Porsche IPO Seeks 75 Billion Valuation 

Volkswagen AG gained 2.4% to 201.40 euros and the automaker is planning to raise as much as 9.5 billion euro through the initial public offering of its sports car division Porsche Automobil. 

Porsche Auto is expected to fetch a valuation between 70 billion and 75 billion euros. 

 

Bundesbank Estimates Recession Ahead 

The German economy is anticipated to slow down considerably and slip into a recession in the first quarter 2023, according to the monthly report released by the Bundesbank Monday. 

The bank noted that the economic outlook is "extremely uncertain" as energy intensive businesses suffer from a sky-high oil and natural gas prices and slowing consumer spending. 

On the consumer inflation front, prices are expected to rise at a faster pace with the expiry of the government subsidy in the purchase of transportation fuel and price cap on utilities on September 1. 

 

Portugal's PPI Eases 

Portugal's producer price inflation eased for the second month in a row. 

Prices rose at a slower annual pace of 22.4% in August after rising 24.6% in July, Statistics Portugal reported Monday. 

Energy prices surged 49.7% and intermediate goods prices increased 20.4%. 

On a monthly basis, prices fell 1%, reversing the increase of 0.6% in July.