Business Maverick: Stocks Rally as Swap Traders Dial Back Fed Wagers: Markets Wrap

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The stock market snapped back at the end of a dizzying week as traders reduced their bets on a Federal Reserve hike while parsing a raft of Wall Street earnings and hoping for signs of capitulation that could set the stage for a more sustained recovery.

American equities halted a five-day slide, with swaps pricing in 80 basis points of Fed tightening in July — still an aggressive boost that leaves investors wondering about the odds of a recession — but down from a full point earlier this week. Banks led gains afterEconomic readings were all over the place, but it was a drop in US consumer long-term inflation expectations to a one-year low that effectively captured traders’ attention.

of a super-sized rate increase, and St. Louis’s James Bullard said he would defer judgment to the central bank’s meeting. He was quoted earlier this week as saying he favored sticking with a 75-basis-point boost.“While a recession is increasingly likely, bulls note that a lot of bad news is already being priced in, and if a recession is shallow, there is upside to markets over the next year,” said Mark Hackett, chief of investment research at Nationwide.

“The markets today reflect a slowdown or a mild recession already,” said Kara Murphy, chief investment officer at Kestra Holdings. “As soon as we have confirmation that the Fed is winning the war with inflation — that means we need to see multiple data points suggesting that prices are slowing — I think that will be a risk-on sign for the market.”

 

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