Short-term yields rose, and the stock market slumped, with this comment: recent data suggest “the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said.
Given the market is now pricing in a 71% chance of a half point hike, an investor can infer that Powell & Co. will probably need to see something tamer than the consensus expectations of a 208,000 increase in payrolls and a 0.3% rise in CPI for February to stick with quarter-point increases. “We have been surprised by equity markets’ YTD resilience, but outside Europe few drivers have changed meaningfully, in our view. Growth data have improved, but mostly from the labor market, we note, which points to margin compression and, of course, sticky inflation. U.S. earnings momentum remains negative,” it says.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.