Stocks Bounce After Rough CPI Day As Bonds Mixed: Markets Wrap

(Bloomberg) -- Wall Street traders reeling from an unexpected pickup in US inflation sent stocks higher on Wednesday.

Equities rebounded after a slide triggered by a reset in Federal Reserve rate expectations — and amplified by moves in derivatives markets. That was ahead of an expiration of VIX contracts that drove the so called “fear gauge” to its highest since November. Treasuries were mixed, with two-year yields dropping and 30-year bond rates edging up.

“Investors should expect continued volatility as the market sorts out the continued uncertainty over how the Federal Reserve will respond to the ongoing inflation situation,” said Jeremy Straub at Coastal Wealth.“The stock market never moves higher without fits and starts along the way.”

Fed Bank of Chicago President Austan Goolsbee said slightly higher inflation data for a few months would still be consistent with a path back to the central bank’s 2% goal. Traders are now only fully pricing in three Fed rate cuts for this year, with around a 70% chance of a fourth reduction. That lines up with the US central bank’s own forecast for three easing moves, though it is a far cry from just a month ago when swaps showed the potential for as many as seven downward shifts in the cash rate.

The S&P 500 hovered near 4,980. Treasury 10-year yields fell two basis points to 4.29%. The dollar fluctuated. Bitcoin climbed past $51,000 in a broad cryptocurrency rally that saw Ether, the second-biggest token, advance back to where it was before the TerraUSD stablecoin collapsed almost two years ago.

Corporate Highlights:

• Uber Technologies Inc. will buy back as much as $7 billion in shares to return capital to shareholders after reporting its first full year of operating profit and consistent positive free cash flow in 2023.
• Lyft Inc. issued a massive correction to its outlook for earnings margin in 2024, saying its margin is expected to expand by 50 basis points — not the 500 basis points written into an earnings presentation released earlier on Tuesday.
• Airbnb Inc. ended 2023 stronger than analysts’ had expected but suggested that demand in the current quarter wouldn’t be as robust as the last.
• Robinhood Markets Inc. reported revenue that topped estimates and executives said deposit growth is outpacing that of last year.
• Airbnb Inc. ended 2023 stronger than analysts’ had expected but suggested that demand in the current quarter wouldn’t be as robust as the last.
• Continental AG is cutting around 7,150 positions in its struggling auto unit to make the business more competitive for the complex shift to electric vehicles and digital offerings.
• Thyssenkrupp AG cut its sales outlook following a decline in orders, as well as booking another writedown on its struggling steel business.

Key Events This Week:

• Japan GDP, industrial production, Thursday
• US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
• ECB President Christine Lagarde speaks, Thursday
• Atlanta Fed President Raphael Bostic speaks, Thursday
• Fed Governor Christopher Waller speaks, Thursday
• ECB chief economist Philip Lane speaks, Thursday
• US housing starts, PPI, University of Michigan consumer sentiment, Friday
• San Francisco Fed President Mary Daly speaks, Friday
• Fed Vice Chair for Supervision Michael Barr speaks, Friday
• ECB executive board member Isabel Schnabel speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.6% as of 9:30 a.m. New York time
• The Nasdaq 100 rose 0.7%
• The Dow Jones Industrial Average rose 0.3%
• The Stoxx Europe 600 rose 0.4%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0717
• The British pound fell 0.3% to $1.2558
• The Japanese yen rose 0.2% to 150.56 per dollar

Cryptocurrencies

• Bitcoin rose 4.3% to $51,713.26
• Ether rose 4.9% to $2,761.84

Bonds

• The yield on 10-year Treasuries declined two basis points to 4.29%
• Germany’s 10-year yield declined two basis points to 2.38%
• Britain’s 10-year yield declined six basis points to 4.10%

Commodities

• West Texas Intermediate crude rose 0.5% to $78.27 a barrel
• Spot gold fell 0.2% to $1,989.98 an ounce

This story was produced with the assistance of Bloomberg Automation.

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