WASHINGTON: Federal Reserve (Fed) chair Jerome Powell on Wednesday (March 8) reaffirmed his message of higher and potentially faster interest rate increases, but emphasised that debate was still under way with a decision hinging on data to be issued before the US central bank’s policy meeting in two weeks.

“If – and I stress that no decision has been made on this – but if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell told the US House of Representatives Financial Services Committee in testimony that added a cautionary clause to the otherwise identical message he delivered to a Senate committee on Tuesday.

He emphasised the point again in response to a question explicitly about the expected outcome of the March 21-22 meeting from Representative Patrick McHenry, the Republican chair of the committee.

“We have not made any decision,” Powell said, but will be looking closely at upcoming jobs data on Friday and inflation data next week in deciding whether rate increases need to shift back into a higher gear.

As happened in the session on Tuesday, lawmakers pressed Powell about the impact Fed policy was having on the economy and whether officials were risking recession in the drive to temper price increases.

Powell acknowledged once again that the Fed was wrong in initially thinking inflation was only the result of “transitory” factors that would ease on their own, and said he was surprised as well in how the labour market has behaved through the recovery from the Covid-19 pandemic.

There have been “a bunch of firsts”, Powell said. “If we ever get this pitch again, we’ll know how to swing at it.”

Asked if he would pause interest rate increases to avoid a recession, Powell responded “I don’t do ‘yes or no’ on ‘will I pause interest rate hikes?’ That’s a serious question. I can’t tell you because I don’t know all the facts.”

The Fed’’s intense battle against inflation over the past year has reshaped financial markets, made home mortgages and other credit more costly, and aimed to cool the economy overall.

As of the start of the year it seemed to be working, with Powell at a Feb 1 news conference saying a “disinflationary process” had taken hold.

Inflation data since then has been worse than expected, and revisions to prior months showed the Fed had made less progress than thought in returning inflation to its 2% target from current levels that are more than double that.

As Powell delivered his opening remarks, new job openings data showed little progress on one measure the Fed has focused on, with employers still holding 1.9 jobs open for each unemployed person, well above pre-pandemic norms.

Other aspects of the data, however, moved gradually in ways consistent with a softer job market. Overall openings dropped slightly, the rate at which workers were quitting continued a gradual decline, and the rate of layoffs increased.

In a separate release on Wednesday, the Fed’s “Beige Book” report of anecdotal information about the economy showed the mixed picture developing on the ground, as some businesses reported freely passing along higher prices to consumers while others said they were starting to slice into profits to keep prices competitive.

Diminished corporate profit margins are something Powell said in the hearings this week should help pull inflation down after they escalated during the era of pandemic shortages.

But even if inflation has moderated from its high point last summer, it is not falling fast enough for the Fed’s liking. The Fed chief’s semi-annual testimony to Congress this week has again reset expectations of where the Fed is heading, with his blunt assessment that “the ultimate level of interest rates is likely to be higher than previously anticipated” because inflation is not falling as fast as it seemed just a few weeks ago.

Rate futures markets now expect policymakers to approve a half-percentage-point rate hike at the upcoming meeting.

Officials will also update projections on how high rates will ultimately need to be increased in order to squelch inflation. In their last set of projections, in mid-December, the median estimate of the high point of the Fed’s benchmark overnight interest rate was between 5.00% and 5.25%, versus the current 4.50%-4.75% range.

Where that ends up remains to be seen, with Powell even offering some rationale for the benefits of slower rate hikes.

After a year of rapid rate increases, the economy may still be adjusting, Powell said, an argument for allowing more data to accumulate.

“We know that slowing down the pace of rate hikes this year is a way for us to see more of those effects,” Powell said. – Reuters

The Federal Reserve will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the “totality” of incoming information suggests tougher measures are needed to control inflation, Fed Chair Jerome Powell told U.S. lawmakers on Tuesday.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” the U.S. central bank chief said in his semi-annual testimony before the Senate Banking Committee.

While some of that unexpected economic strength may have been due to warm weather and other seasonal effects, Powell said it may also be a sign the Fed needs to do more to temper inflation, perhaps even returning to larger rate increases than the quarter-percentage-point steps officials had been intending to use going forward.

“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Powell said.

The comments were Powell’s first since inflation unexpectedly jumped in January, and marked a stark acknowledgement that the “disinflationary process” he spoke of repeatedly in a Feb. 1 news conference was not unfolding smoothly.

Senators responded with a broad set of questions and pointed criticism around whether the Fed was diagnosing the inflation problem correctly and if price pressures could be tamed without significant damage to economic growth and the job market.

Democrats on the committee focused on the role high corporate profits may be playing in persistent inflation, with Senator Elizabeth Warren of Massachusetts charging that the Fed was “gambling with people’s lives” through rate hikes that, by the central bank’s most recent projections, would lead the unemployment rate to increase by more than a percentage point – a loss associated in the past with economic recessions.

“You claim there is only one solution: Lay off millions of workers,” Warren said.

“Will working people be better off if we just walk away from our jobs and inflation rebounds?” Powell retorted.

“Raising interest rates certainly won’t stop business from exploiting all these crises to jack up prices,” said Senator Sherrod Brown, a Democrat from Ohio who chairs the committee.

Republicans focused on whether energy policy was restricting supply and keeping prices higher than needed, and whether restrained federal spending could help the Fed’s cause.

“The only way to get this sticky inflation down is to attack it at the monetary side and the fiscal side. The more we help on the fiscal side, the fewer people you will have to throw out of work,” said Senator John Kennedy, a Republican from Louisiana.

“It could work out that way,” said Powell, who at a separate point in the hearing agreed with Democratic lawmakers’ assertions that lower corporate profits could help lower inflation, and with Republicans’ arguments that more energy production could help lower prices.

“It’s not for us to point fingers,” Reuters quoted the Fed chief saying.

‘SURPRISINGLY HAWKISH’

Powell’s remarks, virtually assuring that Fed officials will project a higher endpoint for the central bank’s benchmark overnight interest rate at the upcoming March 21-22 meeting, sparked a quick repricing in bond markets as investors boosted bets that the Fed would approve a half-percentage-point rate hike when they meet in two weeks.

The Fed’s policy rate is currently in the 4.50%-4.75% range. As of December, officials saw that rate rising to a peak of around 5.1%, a level investors expect may move at least half a percentage point higher now.

Equity markets added to initial losses and ended the day sharply lower, with the S&P 500 (.SPX) index dropping more than 1.5%. The U.S. dollar also rose, and yields on the 2-year Treasury climbed above 5% – the highest since 2007.

Powell’s statement was “surprisingly hawkish,” said Michael Brown, a market analyst with TraderX in London. With a 50-basis-point rate hike now in play, Brown said a strong monthly jobs report on Friday would likely lead to “calls for a 6% terminal rate,” nearly a percentage point higher than Fed officials had projected as of December.

The March 10 release of the Labor Department’s jobs report for February and an inflation report next week were cited by Powell as important in shaping what the Fed does at its next meeting.

Powell will testify again on Wednesday before the U.S. House of Representatives Financial Services Committee.

‘LONG WAY TO GO’

The hearing and Powell’s testimony honed in on an issue that is now at the center of the Fed’s discussions as officials try to determine whether recent data will prove to be a “blip,” or end up signaling that inflation remains stickier than thought and warrants a tougher response from the Fed.

In his testimony, Powell noted that much of the impact of the central bank’s monetary policy may still be in the pipeline, with the labor market still sustaining a 3.4% unemployment rate not seen since 1969, and strong wage gains.

While Powell said he thought the Fed’s 2% inflation target could still be met without dealing a major blow to the U.S. labor market, he acknowledged on Tuesday that “there will very likely be some softening in labor market conditions.”

How much remains unclear, but Powell said the focus will remain more squarely on how inflation behaves.

Inflation has fallen since Powell’s last appearances before Congress. After topping out at an annual rate of 9.1% in June, the Consumer Price Index dropped to 6.4% in January; the separate Personal Consumption Expenditures price index, which the Fed uses as the basis for its 2% target, peaked at 7% in June and had fallen to 5.4% as of January.

But that remains too high, Powell said.

“The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” Powell said, adding later in the hearing that “the social costs of failure are very, very high.”

Bloomberg) — Two Federal Reserve policymakers cautioned that recent stronger-than-expected readings on the US economy could push them to raise interest rates by more than previously expected.

In remarks Thursday, Governor Christopher Waller said that if payroll and inflation data cool after hot prints in January, “then I would endorse raising the target range for the federal funds rate a couple more times, to a projected terminal rate between 5.1% and 5.4%.”

“On the other hand, if those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released,” Waller said in remarks prepared for delivery at an event hosted by the Mid-Size Bank Coalition of America.

His virtual event, including the question and answer session following delivery of his prepared remarks, was canceled after a participant displayed pornographic content that was visible to viewers. The organizers said they had been the victim of “teleconferencing or Zoom hijacking.”

Waller’s speech followed comments by Atlanta Fed President Raphael Bostic, who told reporters that he still favored raising rates by 25 basis points in March but was open to lifting borrowing costs higher than he had envisioned if the economy remained so robust.

“I want to be completely clear: There is a case to be made that we need to go higher,” Bostic said. “Jobs have come in stronger than we expected. Inflation is remaining stubborn at elevated levels. Consumer spending is strong. Labor markets remain quite tight.”

Market reaction to Bostic was mixed. US stocks climbed on Thursday, with investors focusing on a comment that the central bank could be in a position to pause rate hikes sometime this summer. Still, yields across the Treasury market closed higher after rising earlier in the day on another batch of strong labor-market data. The focus now shifts to a report on the US services sector due Friday.

US central bankers have raised rates rapidly from near zero a year ago to a target range of 4.5% to 4.75%, including a series of four jumbo 0.75 percentage-point increases. In February, they stepped down to a 25 basis-point increase after a half-point move in December.

Officials next meet March 21-22, and by then they will have seen fresh reports on employment and inflation. Recent incoming data has been surprisingly strong: Employers added 517,000 new workers in January while inflation remains well above the central bank’s 2% target.

Waller said the payroll report, together with a decline in the unemployment rate in January to 3.4%, showed “that, instead of loosening, the labor market was tightening.”

Fed officials are discussing their evolving outlook, which may include holding the policy rate higher for longer than they expected when they published their last forecast in December.

That outlook showed a full percentage point of cuts by the end of 2024, according to the median projection. Officials will update their quarterly forecasts later this month.

Fed Chair Jerome Powell will have a chance to update lawmakers on the outlook when he heads to Capitol Hill next week to deliver his semi-annual testimony to Congress. He appears before the Senate Banking Committee on Tuesday and the House Financial Services Committee Wednesday.

By Yasin Ebrahim

Investing.com — The Dow closed flat Wednesday, as Treasury yields continued to advance on signs the disinflation in goods has run out of steam suggesting that the Fed’s rate-hike path may be steeper than expected. 

The Dow Jones Industrial Average gained 0.02%, or 5 points, and S&P 500 fell 0.46%, and the Nasdaq Composite was down 0.66%.

The February ISM Manufacturing PMI rose to 47.7 from 47.4, but a deeper dive into the data showed fresh signs of price pressures.

The prices paid index of the ISM manufacturing report “rose out of contraction to 51.3,” Jefferies said, pointing to signs that “the disinflationary trend in goods prices that was in place at the end of last year has run out of steam.”

Fresh signs of sticky inflation pushed Treasury yields sharply higher on bets that higher for longer interest rates are needed to cull inflation. The 10-year Treasury yield topped 4% for the first since November, keeping tech stocks in the firing line and extending the slump seen in February.

On the earnings front, Lowe’s Companies Inc (NYSE:LOW) fell nearly 6% after the home improvement retailer reported fourth-quarter revenue that missed Wall Street estimates and annual sales guidance that also surprised to the downside.

“[W]e note weaker than expected ongoing sales trends that are set to persist, a sharp decline in credit income achieved in the quarter, and a margin outlook that remains muted relative to history,” Goldman Sachs said in a note.

Electric vehicle stocks were also in focus as Tesla (NASDAQ:TSLA) kicks off its investor day, with the EV maker expected to lay out its Master Plan 3 and provide insights about its long-term growth plan.

“This next ‘Master Plan’ from Musk will give further insight into the broader strategic roadmap looking ahead and lays the foundation for the next decade for Tesla with the green tidal wave hitting globally on the shift to EVs,” Wedbush said.

Rival EV maker Rivian Automotive Inc (NASDAQ:RIVN) reported mixed fourth-quarter results as revenue missed estimates, and annual production also fell shy of Wall Street expectations, sending it down more than 18%.

In other news, 3M Company (NYSE:MMM), a major Dow component, gained more than 2% as data from the Department of Defense records showed the vast majority of claimants in Combat Arms earplug litigation had “normal hearing.”

By Yasin Ebrahim

Investing.com — The Dow fell Tuesday, wrapping up February with a monthly loss as surging rates battered stocks after a string of data pointing to underlying strength in the economy forced investors to price in higher for longer Federal Reserve interest rates.

The Dow Jones Industrial Average fell 0.65%, or 214 points, taking losses for February to about 4%. The S&P 500 fell 0.29%, and the Nasdaq Composite was down 0.10%.

Tech, which is down about 5% from its peak earlier this month, pared earlier gains despite a jump in Meta.

Meta Platforms (NASDAQ:META) rallied more than 3%, building on gains from a day earlier when the social media giant said it created a new product team to work on building generative AI tools to integrate into its products.

Zoom Video Communications (NASDAQ:ZM) closed up about 1% after the video conferencing platform reported quarterly results that beat Wall Street expectations on both the top and bottom lines, driven by growth in its enterprise segment.

Zoom’s guidance on revenue, however, fell short of estimates, prompting some on Wall Street to remain on the sidelines.

“While we view the guide as increasingly de-risked, we would prefer to see revenue re-acceleration via Online stabilization and an improving Enterprise mix (via Phone/Contact Center) before becoming more constructive,” Goldman Sachs said in a note.

Elsewhere on the earnings front, meanwhile, Target Corporation (NYSE:TGT) rose 1% following better-than-expected fourth-quarter results, though its annual guidance missed estimates keeping a lid on gains.

“[W]e’re planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment,” said Target chief executive Brian Cornell. 

Advance Auto Parts Inc (NYSE:AAP) was also in the ascendency, rising 3% after its Q4 results topped analysts’ forecasts, though the automotive aftermarket parts company struck a cautious tone on the year ahead.

“As we begin the year, we remain cautious surrounding the macroeconomic backdrop, including the potential for ongoing pressure on low to middle income consumers,” said Advance Auto Parts CEO Tom Greco.

In other news, Arconic Corp (NYSE:ARNC) surged more than 19% on reports the aluminum products maker has attracted buying interest from private-equity company Apollo Global Management.

On the economic front, meanwhile, consumer confidence in February fell to its lowest reading since November, pointing to signs strong consumer spending, which has underpinned strong growth so far this year, may be starting to slow.

“The data today continue to show that the Fed’s job is very tough. Consumers are only just barely starting to reign in their spending plans, but they still see good strength in the labor market,” Jefferies said in a note.

The broader market’s slip in February was pressured by a surge in rates as strong economic data forced investors to play catch-up and price in further Fed rate hikes that have pushed the 10-year Treasury yield close to 4%.

Investors will likely have to contend with choppy market activity in the weeks ahead amid inflation data, Fed policy, and geopolitical uncertainty that will continue to be the drivers “over the short run,” Janney Montgomery Scott said.

“The trading range for the S&P 500 still looks to be within 3850 – 3950 support and 4100 – 4200 resistance over the next few weeks in our opinion,” it added.

By Wayne Cole

SYDNEY (Reuters) – Asian shares slipped on Monday as markets were forced to price in ever-loftier peaks for U.S. and European interest rates, slugging bonds globally and pushing the dollar to multi-week highs.

Investors are braced for more challenging U.S. data including the closely-watched ISM measures of manufacturing and services, the latter being especially important following January’s unexpected spike in activity.

There are also at least six Federal Reserve policy makers on the speaking diary this week to offer a running commentary on the likelihood of further rate hikes.

China has manufacturing surveys and the National People’s Congress kicks off at the weekend and will see new economic policy targets and policies, as well as a reshuffling of government officials.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%, having shed 2.6% last week. Japan’s Nikkei eased 0.4% and South Korea 0.9%.

S&P 500 futures were flat, while Nasdaq futures edged up 0.1%. Strong data on spending and core prices saw the S&P 500 crack support at 4,000 on Friday and retrace 61.2% of this year’s rally.

Fed futures now have rates peaking around 5.42%, implying at least three more hikes from the current 4.50% to 4.75% band. Markets have also nudged up the likely rate tops for the European Central Bank and the Bank of England.

Bruce Kasman, head of economic research at JPMorgan, has added another quarter-point hike to the ECB outlook, taking it to 100 basis points. Germany’s 2-year bond yield broke above 3.0% on Friday for the first time since 2008.

“The risk is clearly skewed toward greater action from the Fed,” says Kasman.

“Demand is proving resilient in the face of tightening and lingering damage to supply from the pandemic is limiting the moderation in inflation,” he added. “The transmission of the rapid shift in policy still underway also raises the risk of a recession not intended by central banks.”

The Atlanta Fed’s influential GDP Now tracker has the U.S economy growing an annualised 2.7% in the first quarter, showing no slowdown from the December quarter.

Higher rates and yields stretch valuations for equities, especially those with high PE ratios and low dividend payouts, which includes much of the tech sector.

Shares in the United States trade at a price to earnings multiples of around 17.5 times forward earnings, compared to 12 times for non-U.S. shares.

Ten-year Treasury bonds also yield more than twice the estimated dividend yield of the S&P 500 Index, and with much less risk.

With the earnings season almost over, around 69% of earnings have surprised on the upside, compared to a historical average of 76%, and annual earnings growth is running around -2%.

The upward shift in Fed expectations has been a boon for the U.S. dollar, which climbed 1.3% on a basket of currencies last week to last stand at 105.220.

The euro was pinned at $1.0548, after touching a seven-week low of $1.0536 on Friday.

The dollar scaled a nine-week top on the yen to stand at 136.40, aided in part by dovish comments from top policy makers at the Bank of Japan.

The rise in the dollar and yields has been a burden for gold, which shed 1.7% last week and was last lying at $1,812 an ounce. [GOL/]

Oil prices edged higher as the prospect of lower Russian exports was balanced by rising inventories in the United States and concerns over global economic activity. [O/R]

Brent gained 35 cents to $83.51 a barrel, while U.S. crude rose 34 cents to $76.66 per barrel.

(Reporting by Wayne Cole; Editing by Shri Navaratnam)

By Rae Wee

SINGAPORE (Reuters) – The dollar and sterling were buoyant on Wednesday, after a surprise rebound in business activity in the United States and the UK raised the likelihood that their respective central banks would have further to go in raising interest rates.

Elsewhere, the kiwi surged after the Reserve Bank of New Zealand (RBNZ) on Wednesday raised rates by an expected 50 basis points, but reiterated that inflation remains too high and employment is beyond its maximum sustainable level.

Data released on Tuesday showed that U.S. business activity unexpectedly rebounded in February to reach its highest level in eight months, while the UK flash composite Purchasing Managers’ Index (PMI) similarly surged to 53.0 this month, above the 50 threshold for growth for the first time since July.

The dollar rose against most major currencies after the upbeat data save for sterling, which jumped 0.6% on Tuesday. It was last 0.05% lower at $1.2107.

In the euro zone, its flash composite PMI likewise climbed to a nine-month high of 52.3 in February, supported by surprisingly strong services growth.

The euro, however, failed to benefit from the data as it slid 0.36% in the previous session. It was last 0.04% higher at $1.0652.

“It was kind of an issue of relativities in a sense, that while the services sectors performed better across the board, that extra lift that sterling got, was because of that very, very strong performance,” said Rodrigo Catril, senior currency strategist at National Australia Bank.

“I think the euro is still in a sort of more difficult situation, given that there’s a general sense that the ECB still has more work to do, and that puts a little bit of strain in terms of their growth outlook.”

Against the Japanese yen, the dollar rose to a two-month high of 135.23 in the previous session, and slipped marginally to 134.91 in early Asia trade on Wednesday.

The U.S. dollar index stood at 104.13, having gained 0.3% on Tuesday.

The rebound in U.S. business activity comes on the back of a recent slew of resilient economic data pointing to a still-tight labour market, sticky inflation and robust retail sales in the world’s largest economy.

Markets have since raised their expectations of how high the Federal Reserve would need to lift rates to tame inflation, sending U.S. Treasury yields surging.

The two-year yields jumped to an over three-month high of 4.738% in the previous session, and last stood at 4.6933%.

The benchmark 10-year note yields peaked at 3.9660% in early Asia trade on Wednesday, its highest since last November.

In other currencies, the Aussie slid after data showed that Australian wages grew at the fastest annual pace in a decade last quarter, but was still short of market forecasts.

The Australian dollar fell about 0.3% after the data, and was last 0.1% lower at $0.6849.

The kiwi rose 0.39% to $0.6238, after earlier jumping roughly 0.5% to an intra-day high of $0.6248 immediately after the RBNZ’s cash rate decision.

(Reporting by Rae Wee; Editing by Shri Navaratnam)

February 22 (Reuters) – A look at the day ahead in Asian markets by Jamie McGeever.

US economic indicators on Tuesday accelerated the unrelenting rise in US interest rate expectations, confirming that good news is definitely bad news, at least for financial markets.

Wall Street and global stocks had their worst day of the year after data from the Purchasing Managers’ Index showed the US services sector is coming back to life. Asian markets are likely to follow when they open on Wednesday.

None of the 18 economists polled by Reuters expected the services PMI to bounce back above the 50.0 line between contraction and expansion, and the shockwaves were felt across asset classes.

Stocks plummeted, volatility and the dollar soared, the two-year Treasury yield neared the November post-2007 peak, the US final implied interest rate rose to a new high of 5.36%, and a potential 50 basis point rate hike in the next month is ahead of dealers’ radar.

By Oliver Gray 

Investing.com – U.S. stock futures were trading lower during Monday’s evening deals, with major benchmark averages remaining closed during the regular session for a public holiday.

By 6:30pm ET (11:30pm GMT) Dow Jones Futures and S&P 500 Futures fell 0.3% each, while Nasdaq 100 Futures slipped 0.1%.

In extended deals, Nordson Corp (NASDAQ:NDSN) added 1.1% after the company reported Q1 EPS of $1.95 versus $1.98 expected on revenues of $610.48 million versus $622.98 million expected.

Williams Companies Inc (NYSE:WMB) added 1.4% after reporting Q4 EPS of $1.82, beating expectations of $0.50, while revenue came in at $10.97 billion versus $2.89 billion expected.

HealthStream (NASDAQ:HSTM) reported Q4 EPS of $0.08 versus $0.05 expected on revenue of $68.54 million versus $68.02 million expected.

Ahead in the week, investors will be focused on the release of the FOMC’s latest meeting minutes where policymakers raised rates by 25 basis points.

On the earnings front, major retail companies including Walmart Inc (NYSE:WMT) and Home Depot Inc (NYSE:HD) are set to release results later on Tuesday.

On the bond markets, United States 10-Year rates were at 3.842%.

By Ambar Warrick

Investing.com–Oil prices fell slightly on Friday and were set to close the week lower as concerns over rising U.S. interest rates and a strong dollar largely offset optimism over a potential recovery in Chinese demand. 

U.S. producer price index inflation read higher than expected for January, coming on the heels of a red-hot consumer price index report that indicated that inflation will likely remain stubborn in the world’s largest economy.

The readings, coupled with hawkish overnight comments from Federal Reserve officials, pointed to more interest rate hikes in the coming months- which markets fear could stymie economic growth this year and weigh on crude demand.

Brent oil futures fell 0.1% to $84.55 a barrel, while West Texas Intermediate crude futures fell 0.7% to $77.97 a barrel by 21:13 ET (02:13 GMT). Both contracts were set to lose between 1.5% and 2% this week.

The dollar surged overnight as Fed officials James Bullard and Loretta Mester both talked up more interest rate hikes by the central bank, which in turn weighed on crude prices. Strength in the dollar makes crude more expensive for international buyers, denting global oil demand. 

Oil prices were also dented earlier this week by the Biden Administration’s planned sale of 26 million barrels of crude from the Strategic Petroleum Reserve. This, coupled with data showing a substantially bigger-than-expected build in U.S. crude inventories, pointed to a potential U.S. supply glut in the near-term.

The negative supply and monetary policy cues largely offset optimism over a recovery in Chinese demand, which had offered crude prices some respite this week. Oil markets saw volatile swings in recent sessions as markets weighed a more positive demand outlook against signs of near-term strife.

Both the Organization of Petroleum Exporting Countries and the International Energy Agency hiked their demand forecasts for the year, with a recovery in China set to drive over 50% of oil demand this year.

China also outlined additional spending measures this week, as it moves to shore up economic growth after three years of COVID lockdowns. 

But economic data from China has been somewhat middling, even after the country relaxed most anti-COVID measures earlier this year. Oil bulls are now holding out for more consistent signs of an economic recovery in the world’s largest oil importer. 

BENGALURU: The S&P 500 ended higher on Wednesday after stronger-than-expected retail sales data offered evidence of resilience in the US economy, but gains were capped as investors worried about more interest rate hikes by Federal Reserve in the months ahead.

A Commerce Department report showed retail sales surged 3% in January as purchases of motor vehicles and other goods pushed the number well past the 1.8% estimate from economists polled by Reuters.

On Tuesday, data showed US consumer prices accelerated in January, boosting expectations that the Fed will raise the policy rate at least twice more this year to the 5-5.25% range.

“The good news from retail, and broadly from the stronger economy, has been mostly priced in,” said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky. “At the same time, that strength has taken market expectations of rate cuts off the table and moved the terminal Fed funds rate a little bit higher.”

Fuelled by a rebound in growth stocks that were hammered in last year’s stock market downturn, the S&P 500 has climbed 8% so far in 2023, while the Nasdaq has recovered 15%. A better-than-expected quarterly earnings season has provided cautious optimism.

More than half of all S&P 500 companies have reported quarterly earnings, and nearly 70% of those have topped profit expectations, according to I/B/E/S data from Refinitiv. That compares to a long-term average of 66%.

Apple, Alphabet, Amazon and Tesla rose between 1.4% and 2.4%, driving gains in the S&P 500 and Nasdaq.

The S&P 500 climbed 0.28% to end the session at 4,147.61 points.

The Nasdaq gained 0.92% to 12,070.59 points, while Dow Jones Industrial Average rose 0.11% to 34,128.05 points.

Nine of the 11 S&P 500 sector indexes rose, led by a 1.2% gain in consumer discretionary.

Roblox soared 26% after the gaming platform popular with kids topped quarterly bookings estimates.

US-listed shares of Taiwan Semiconductor Manufacturing Co (TSMC) fell 5.3% after Warren Buffett’s Berkshire Hathaway Inc slashed its stake in the chipmaker.

Shares of Airbnb Inc rose over 13% after the company posted forecast-beating results due to strong travel demand.

Devon Energy slumped about 10% after the shale oil producer missed expectations for quarterly profit due to a hit to production from severe cold weather in the United States and higher expenses.

After the bell, Roku surged 14% following a revenue forecast that beat analysts’ expectations.

Across the US stock market, advancing stocks outnumbered falling ones by a 1.4-to-one ratio.

The S&P 500 posted 19 new highs and no new lows; the Nasdaq recorded 84 new highs and 55 new lows.

Volume on US exchanges was relatively light, with 10.5 billion shares traded, compared to an average of 11.8 billion shares over the previous 20 sessions. — Reuters