Stocks surged this week on rising hopes the Federal Reserve is finally done with its market-crunching hikes to interest rates, which are meant to get inflation under control. A report on Friday underscored that pressure is easing on inflation after it showed employers hired fewer workers last month than expected. Treasury yields tumbled, releasing more of the pressure that had built up.
Since then strong profit reports helped drive some stocks to towering gains, with more businesses than usual reporting better results for the summer than analysts expected. Generac, a maker of backup generators, soared more than 28% for its best week since its stock began trading in 2010. At Expedia Group, another stronger-than-forecast report sent its stock more than 20% higher for its best week since the market was soaring out of the coronavirus crash in early 2020.
“It was really fear that the Fed was going to go too far,” said Katie Nixon, chief investment officer for Northern Trust Wealth Management. Of course, this week’s sharp fall in yields could also end up hurting investors in the long run. Fed Chair Jerome Powell said this week that the central bank may not need to hike rates any more if the recent rise in yields stays “persistent.” Such high yields could slow the economy and push down on inflation by themselves, without requiring the Fed to hike rates again.
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