Shares Choppy and US Yields Decline in Light of Fed Minutes

ByEdward Thompson

Aug 10, 2022

On Thursday, there was a decline in US Treasury yields and global shares remained choppy, as investors remained uncertain about the pace of interest rate increases.

This was after the release of the minutes of the Federal Reserve’s July meeting, which showed that officials were committed to tame rising prices.

Volatile markets

Concerns about a possible economic recession have kept markets volatile, even though officials of the Fed indicated in Wednesday’s minutes that they would become less aggressive if inflation slows down.

Analysts said that the markets were still trying to get a better understanding of the Fed’s minutes and this was keeping the markets volatile.

Most experts said that the minutes had been hawkish because the top priority of all voting members appears to be bringing down inflation and they were ready to do everything necessary to get there.

Analysts said that it appears that the Fed is just using the labor market as cover. The MSCI’s index of global shares had suffered from losses earlier, but managed to rebound and was trading higher by 0.05%.

The continent-wide STOXX 600 index also rose 0.39% by the end of the day.

Treasury yields

With investors still digesting the minutes of the Fed meeting, there was a decline in US Treasury yields. A number of Fed officials spoke out on Thursday that the US Fed needs to continue hiking rates for stopping inflation.

This included Mary Day, the President of the San Francisco Fed, and James Bullard, the President of the St. Louis Fed.

There was a decline in the US 10-year treasury yields to 2.8859%, while they had been 2.985% a day earlier.

As for two-year Treasury yields, they also declined to 3.2057%, while they had been 3.295% a day earlier.

The yield curve between the two remained inverted, which is considered an indicator of an upcoming recession.

The yields for the two-year Treasury notes have climbed 43 basis points since the July 27th meeting of the Fed, which means the bond market believes that they would continue to raise rates for a long time.

As for the stock market, it has gone up by 5%, which shows that the market thinks the Fed will increase rates relatively quickly and could start decreasing next year.

Major indexes

As for the major indexes on Wall Street, they managed to reverse losses made early in the session and ended the day higher.

This was partly because Cisco Systems posted an upbeat sales forecast, which gave the technology sector a boost.

Some of the top gainers were equities in energy and industrial sectors. A 0.06% gain was recorded in the Dow Jones Industrial Average, as it rose to 33,999.04.

A 0.23% rise was also seen in the S&P 500, which saw it reach 4,283.74, while a 0.21% rise in the Nasdaq Composite saw it reach 12,965.34.

There was an almost 3% gain in oil prices, thanks to US fuel consumption data and an expected decline in Russian supply, which offset worries about slowing consumer demand.

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