(Bloomberg) -- A stellar quarter for stocks is ending with a sense of caution as bond yields rose after the latest Fedspeak reinforced bets policymakers will be in no rush to cut interest rates.
Treasuries fell across the US curve, with shorter maturities leading the way after Federal Reserve Governor Christopher Waller said he wants to see "at least a couple months of better inflation data" before cutting rates. He spoke ahead of the release of the Fed's preferred inflation gauge and Jerome Powell's remarks Friday — when markets will be closed.
"When you title a speech 'There's Still No Rush', you have a point to make," said Peter Boockvar, author of the Boock Report. "Waller joins voting member Raphael Bostic in wanting to wait — and only likely expecting one-two cuts this year."
The S&P 500 wavered after closing at a record. Treasury two-year yields rose five basis points to 4.61%. The bond market will close at 2 p.m. New York time Thursday. Swaps traders trimmed wagers on Fed policy easing, with contracts now showing an implied probability of about 60% for a June cut.
"Right or wrong, expectations for a June rate cut probably won't shift unless inflation continues to rise and the labor market appears to be a major contributor to the increase," said Chris Larkin at E*Trade from Morgan Stanley.
In economic data, the government's two main measures of US activity — gross domestic product and consumer spending — posted strong advances at the end of last year.
"Thursday's GDP print affirms the strength of the economy," said Jeremy Straub at Coastal Wealth. "While rate cuts from the Fed would be welcome news for stocks, they are not a requirement for a strong market. The market has been able to rally for the past 18-months even with high interest rates."
Straub also noted that as long as Friday's personal consumption expenditures price index comes in at or near expectations, the Fed is likely to still cut interest rates three times in 2024.
To Chris Zaccarelli at Independent Advisor Alliance, a solid economy — driven by a resilient consumer — sets the table for another strong earnings season, which will kick off next month.
"For those that are still holding onto the idea that the much-forecasted 2023 recession is right around the corner, they've missed an excellent 15 (if not 17) months in the stock market," Zaccarelli noted.
Corporate Highlights:
- Home Depot Inc. said it would buy building-products distributor SRS Distribution Inc. for about $18.25 billion in a bid to bolster the company's professional services business.
- Walgreens Boots Alliance Inc. narrowed its fiscal 2024 guidance even as the drugstore chain beat Wall Street's estimates for second-quarter profit and revenue.
- Palantir Technologies Inc. was cut to sell at Monness, Crespi, Hardt & Co., which cited "egregiously rich" valuation.
- Estee Lauder Cos. was raised to buy at Bank of America Corp., which said the company's earnings have now bottomed.
Key events this week:
- Good Friday. Exchanges closed in US and many other countries in observance of holiday. US federal government is open.
- US personal income and spending, PCE deflator, Friday
- San Francisco Fed President Mary Daly speaks, Friday
- Fed Chair Jerome Powell speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 9:30 a.m. New York time
- The Nasdaq 100 fell 0.1%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.0808
- The British pound was little changed at $1.2636
- The Japanese yen was little changed at 151.29 per dollar
Cryptocurrencies
- Bitcoin rose 3% to $70,930.76
- Ether rose 1.9% to $3,577.72
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.22%
- Germany's 10-year yield advanced two basis points to 2.31%
- Britain's 10-year yield advanced two basis points to 3.95%
Commodities
- West Texas Intermediate crude rose 1.4% to $82.47 a barrel
- Spot gold rose 0.6% to $2,208.66 an ounce
This story was produced with the assistance of Bloomberg Automation.
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