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(Bloomberg) -- Stocks rebounded sharply in the final hour of New York trading, with the S&P 500 almost wiping out a selloff that pushed it to the brink of a bear market earlier Thursday.
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The turnaround came as Federal Reserve Bank of San Francisco President Mary Daly told Bloomberg News that a 75-basis-point increase in rates is “not a primary consideration,” while adding that the US is in a strong place and should be able to withstand monetary tightening. For a market that’s been haunted by fears that restrictive policy could cause a recession, those comments offered a degree of comfort at the end of a day marked by brutal volatility.
Read: Powell Reiterates Half-Point Hikes Are Likely in June and July
The caution born from rising rates held firm on Thursday as data showed prices paid to US producers rose more than forecast in April, reinforcing bets the Fed will further tighten policy. Treasuries rose with the dollar as investors sought haven assets. The euro tumbled, the Swiss franc weakened to reach parity with the dollar for first time since 2019 and Hong Kong’s Monetary Authority intervened to defend its currency peg. The Japanese yen -- a traditional haven that, in an ironic twist, has not acted in that role so much of late -- rallied.
“Right now, confidence is shaken among market participants and people are in no mood to take on risk,” wrote Fawad Razaqzada, an analyst at City Index and FOREX.com. “Even when we see periods of relative calm, it doesn’t last very long.”
“It’s a really hard ride for retail investors, really hard,” said Craig W. Johnson, chief market technician at Piper Sandler.
“Even though we should reach peak inflation soon, the issue of inflation is not going to subside enough to avoid stagflation from becoming a bigger problem,” said Matt Maley, chief market strategist at Miller Tabak + Co. “Therefore, any near-term bounce should be sold, even if that bounce lasts a couple of weeks.”
The Senate voted to confirm Jerome Powell for a second four-year term as Fed chairman on Thursday, trusting him to tackle the highest inflation to confront the country in decades. The Fed began raising interest rates in March and says it will keep going until price pressures cool, seeking a soft landing that doesn’t crash the economy. But critics doubt the central bank can avoid a recession as it tightens monetary policy that had been eased dramatically during the pandemic.
US mortgage rates jumped again this week, extending a steep climb that is shutting some would-be homebuyers out of the market. The average for a 30-year loan was 5.3%, up from 5.27% last week and the highest since July 2009, Freddie Mac said Thursday.
Here are key events to watch this week:
University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
The S&P 500 fell 0.1% as of 4 p.m. New York time
The Nasdaq 100 fell 0.2%
The Dow Jones Industrial Average fell 0.3%
The MSCI World index fell 0.8%
The Bloomberg Dollar Spot Index rose 0.5%
The euro fell 1.3% to $1.0373
The British pound fell 0.5% to $1.2194
The Japanese yen rose 1.2% to 128.43 per dollar
The yield on 10-year Treasuries declined five basis points to 2.87%
Germany’s 10-year yield declined 15 basis points to 0.84%
Britain’s 10-year yield declined 16 basis points to 1.66%
West Texas Intermediate crude rose 1% to $106.74 a barrel
Gold futures fell 1.8% to $1,821.20 an ounce
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