Wall Street’s three major indexes closed higher on Wednesday and the dollar soared along with the U.S. Treasury yields after U.S. retail sales data for January rose by the most in almost two years, suggesting a strong economy while fueling concerns about further interest rate hikes.
Following two consecutive monthly downturn, the Commerce Department reported that retail sales increased 3.0% last month, the biggest increase since March 2021, after falling by an unrevised 1.1% in December.
After combining Tuesday’s data showing a monthly inflation pick-up in January, proof that consumer spending has elevated which has incited concerns that the United States Federal Reserve will continue to hike interest rates for longer than some investors had hoped.
Managing director at Granite Wealth Management Bruce Zaro noted, “It’s all about the Fed. As figures like retail sales come out quite strong, this is more food for the Fed to keep raising rates, maybe at reduced pace, but, at the very least, to keep them higher for longer.”
The Dow Jones Industrial Average (.DJI) picked up by 38.78 points, or 0.11%, to 34,128.05; the S&P 500 (.SPX) surged by 11.47 points, or 0.28%, to 4,147.6; and the Nasdaq Composite (.IXIC) boosted 110.45 points, or 0.92%, to 12,070.59.
MSCI’s gauge of stocks across the globe (.MIWD00000PUS) rose 0.04% but has gained almost 8% so far this year.
Some investors questioned whether the gains could be sustained.
Chief investment officer at Rockefeller Global Family Office Jimmy Chang stated,”It gets very difficult to justify further upside because we’re looking at earnings estimates still coming down and I also don’t think we’re out of the woods with the recession risk. I think a lot of the strength is transitory.”
Following strong retail trade and inflation data from the United States, the dollar index reached its highest point since January 6.
The index, which calculates the greenback against a collection of major currencies, was recently up 0.562% after rising upto 0.86%. The euro plummeted by 0.42% at $1.069.
The Japanese yen fell 0.77% against the US dollar to 134.14 per dollar, whilst the pound was last exchanging at $1.2035, down 1.11% during the day.
In U.S. Treasuries, benchmark 10-year notes upsurged 3.8 basis points from 3.761% to 3.799%, late on Tuesday. The 30-year bond last gained 3.8329%, from 3.801%, and was up by 3.2 basis points . The 2-year note was last descending 0.2 basis points to yield 4.6203%, from 4.622%.
Michael Lorizio, senior fixed income trader at Manulife Investment Management, spoke “The Fed’s been very clear that they believe they have a ways to go with rates, and that it would be data-dependent.”
“As the data has evolved, now the market is coming back towards the Fed’s predictions, because the data has been supportive of that,” he also voiced.
Oil prices finished lower, but recovered from session lows as traders discounted a build in U.S. crude stocks because of a data adjustment, while predictions for higher global demand were supportive.
US crude finished the day down 0.59% at $78.59 for every barrel, while Brent finished the day down 0.23% at $85.38.
Gold prices have dropped to their lowest point as of early January, overshadowed by a stronger dollar and positive US data.
Spot gold fell 0.9% to $1,838.12 per ounce. Gold futures in the United States fell 0.91% to $1,837.10 per ounce.
