Wall Street pushes Treasury and stock yields higher

BOSTON/LONDON (Reuters) – US stocks regained ground on Tuesday, while Treasury yields rose higher and oil prices fell, as investors revised their expectations for a rate hike after hawkish comments from the US Federal Reserve.

Dow Jones Industrial Average (.DJI) It rose 281.07 points, or 0.81%, to 34,834.06 points. Standard & Poor’s 500 (.SPX) It rose 27.59 points, or 0.62%, to 4,488.77 points. And the Nasdaq (nineteenth) It added 87.88 points, or 0.64%, to 13,926.34 points.

Equity gains included banks likely to benefit from higher interest rates such as Morgan Stanley (MS.N) Wells Fargo & Co (WFC.N)and sportswear giant Nike Inc (NKE.N), which rose about 5.5% after beating expectations for quarterly earnings and revenue. Read more

Federal Reserve Chairman Jerome Powell said Monday that the central bank could move “more aggressively” to raise interest rates to fight inflation, perhaps by more than 25 basis points at a time. Read more

Markets were resetting the higher probability with an increase of 50 basis points. On Tuesday morning, money markets had been expecting an 80% rise of 50 basis points in May, despite dropping to 70% around midday.

At around 1345 GMT, the 10-year US Treasury yield was at 2.366%, after hitting its highest level since 2019.

During the speech, “it was easy to ask if it would be possible to raise 75 basis points or even attend an internal meeting,” RBC Capital Markets’ chief US economist, Tom Purcelli, wrote in a note to clients.

“Both results sound incredibly extreme, but when we hear Powell talk about inflation, he seems to be very concerned to us.”

Eurozone government bond yields also rose, with the German 10-year benchmark yield at around 0.515%, the highest since 2018.

Although Wall Street closed lower on Monday after Powell’s comments, stock markets in Europe rose. The STOXX 600 Index is up 0.65%, after jumping to the highest level in recent sessions to reach its highest level in one month. (.stoxx). The FTSE 100 index in London rose 0.54%. (.FTSE).

The MSCI Global Stock Index, which tracks stocks in 50 countries, is up 0.63% on the day (.MIWD00000PUS).

Matthias Schipper, global head of multi-asset portfolio management at Allspring Global Investments, said the rebound in stocks could be a case for investors to buy lower, but growth stocks would suffer if the 10-year yield in the US approached 2.5%.

“We saw a sharp rise in yields yesterday and we see that continuing today over the longer term, so it will likely put pressure on stocks…it will be difficult for stocks to have a positive performance.”

But JPMorgan said 80% of its clients plan to increase exposure to stocks, a record.

“With light positioning, weak sentiment and geopolitical risks likely to fade over time, we believe risks are skewed to the upside,” JPMorgan strategists wrote in a note to clients.

“We believe investors should add risks in areas that have outgrown the downside such as innovation, technology, biotechnology, emerging markets/China and small stocks. These sectors are pricing in a severe global recession, which, in our view, will not materialize.”

The conflict in Ukraine continued to affect sentiment. US President Joe Biden has issued one of his strongest warnings yet that Russia is considering the use of chemical weapons. Read more

Oil prices lost some of their gains on Monday after news that some members of the European Union were considering sanctions on Russian oil – although Germany said the bloc relied too heavily on Russian oil and gas to be able to cut itself. Read more

US crude fell 1.08 percent to 110.91 dollars a barrel, and Brent crude closed at 115.53 dollars, down 0.08 percent on the day.

The US dollar index settled at 98.38, while the euro rose 0.2% to $1,103. Read more

Gold prices fell on Tuesday, dragged down by the Federal Reserve’s hawkish approach to tackling inflation. Spot gold fell 0.6% to $1,923.60 an ounce. Read more

Leading bitcoin is up 4.3% at around $42,803, extending gains since an intraday low of $34,324 on February 24 when Russia invaded Ukraine. Read more

Additional reporting by Lawrence Delevingne in Boston and Elizabeth Hawcroft in London. Editing by Jonathan Otis

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