Stocks fell as the Federal Reserve’s preferred inflation gauges unexpectedly accelerated in January and consumer spending surged. The figures add pressure on policy makers to keep ratcheting up interest rates. The personal consumption expenditures price index rose 5.4% from a year earlier and the core metric was up 4.7%, both marking pickups after several months of declines. The S&P 500 added to its worst weekly selloff since early December down 1.05% while the tech-heavy Nasdaq also tumbled 1.7%.
Treasuries tumbled Friday, extending a fifth straight weekly loss and sending 2-year yields to their highest level since 2007, spurred by bigger-than-expected increases in inflation gauges. Consumer spending adjusted for prices jumped 1.1% from the prior month, the most in nearly two years. Resilient spending paired with the exceptional strength of the labor market will make it even tougher for the Fed to get inflation to its 2% goal. Separate data showed US consumer sentiment rose to the highest in a year while new home sales topped forecasts. Yields ended higher by at least 10bp with 2-year reaching 4.836%, setting its highest level since 2007. While longer-dated yields declined less, though 10-year reached 3.975%, a new YTD high.
The dollar is on pace for its best weekly run since September as Fed rate-hike bets are lifted. The Bloomberg Dollar Spot Index rose as much as 0.8% to a seven-week high as commodity currencies and the yen lag G-10 peers; the index is up 1.1% on the week and near its year-to-date high.
- USD/JPY up 1.3% to 136.41, the highest level since Dec. 20
- AUD/USD fell 1.2% to 0.6727, the biggest drop since Feb. 15
- NZD/USD fell 1.0% to 0.6165, paring a decline as large as 1.2%
- EUR/USD -0.5% to 1.0547 (range 1.0536–1.0615)
Elsewhere, crude futures rose while precious metals and Bitcoin sank. WTI Crude gained 1.6% to $76.58/bbl, Gold lost 0.6% to $1,811/oz while Copper slumped 2.5% to $3.96/lb.
Global event radar: China PMIs (Wed), Eurozone CPI Inflation (Thurs), National People’s Congress (5th Mar), RBA Meeting (7th Mar), BoJ Meeting (10th Mar), US Employment (11th Mar), US CPI Inflation (14th Mar), US Retail Sales (15th Mar), China Activity Data (15th Mar), ECB Meeting (17th Mar), BoE Meeting (23rd Mar), US FOMC Meeting (23rd Mar), Eurozone CPI Inflation (31st Mar).
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