11 hours ago
There is still a path to a soft landing, says Morgan Stanley’s chief global economist
There is still a path to a soft landing despite comments by Federal Reserve Chairman Jerome Powell suggesting rates could go higher for longeraccording to Morgan Stanley’s chief global economist Seth Carpenter.
Of course, there will have to be a cooldown in the labor market for the Fed to meet its own inflation projections, he said in an appearance Tuesday on CNBC’s “Closing Bell: Overtime.”
Carpenter expects nonfarm payrolls will need to fall below 100,000 a month to achieve that goal. Investors are anticipating this week’s February jobs report to see if the economy continues to heat up or if January’s blockbuster report was an aberration.
“If we stay at 500,000 nonfarm payrolls a month, that’s clearly not doing it. We need to see it slow down, down to, say, below 100,000 a month,” Carpenter said. “But if it stays positive, then I think that kind of trajectory, that’s the path to a soft landing. We still think it’s possible.”
—Sarah Min
11 hours ago
Gundlach says the Fed will “very likely” raise rates by a half point this month
CEO of Double Line Capital jeffrey gundlach saying it is “very likely” that the Federal Reserve will raise interest rates by half a percentage point at his next policy meeting.
“We’ve had a very large increase in short-term interest rates and a further inversion of the yield curve,” Gundlach said Tuesday during a DoubleLine investor webcast. “We don’t need the Fed. All we need is the 2-year Treasury.”
He 2-Year US Treasury Note Yield jumped more than 12 basis points to exceed 5% on Tuesday, hitting its highest level since 2007. The sharp move higher followed the Fed chairman Jerome Powellwho said that interest rates are “it will probably be higher” than previously anticipated.
The so-called bond king said the federal funds rate has almost perfectly mirrored the two-year Treasury yield over the years.
“Now you’re giving corroboration to the idea that the Fed will probably raise the fed funds rate to as high as 5% at the next meeting,” Gundlach said.
—Yun Li
11 hours ago
Small- and mid-cap stocks outpaced Tuesday’s stock market slide
In investments, sometimes you have to settle for suffering less than others.
The Dow Jones Industrial Average fell 1.72% on Tuesday, repaying all the remaining rally it had made in 2023 and the S&P 500 fell 1.53%, both after Fed Chairman Powell told Congress that benchmark interest rates may need to rise more than thought to successfully control inflation.
Using those declines as yardsticks, which parts of the stock market outperformed in relative terms, holding up better than the largest stocks?
Well, the Nasdaq Composite, which after all contains over 2,500 stocks, fell 1.25% less on Tuesday. The S&P Midcap 400 Index fell 1.18%, while the S&P Smallcap 600 Index lost just 1.0%. The Russell 2000, another barometer of small-cap companies, fell 1.25%.
With the help of stronger airlines, 20-stock Dow Transports shed 1.25%. The NYSE Consumer Staples Index weakened 0.99% and the NYSE Tech/Media/Telecom Index fell 1.07%.
Bad, but not that bad.
—Scott Snapper
11 hours ago
Short-term Treasury yields rise, with rates topping 5%
Bond yields rose on Tuesday, and a variety of short-term Treasuries saw their rates break above 5%.
Rates on 3-month, 6-month, 1-year and 2-year Treasury bonds rose more than 5% on Tuesday. At their highs, rates on the 3-month Treasury bill and 2-year Treasury bill rose to levels last seen in 2007, while the yield on the 1-year note hit its highest level since 2006.
In addition, the yield spread between the 2-year and 10-year Treasuries hit a new low of -105.3, the lowest level since 1981.
Speaking before the Senate Committee on Banking, Housing, and Urban Affairs earlier in the day, Federal Reserve Jerome Powell said that interest rates are “probably be olderthan the central bank had anticipated. The comments raised fears that policymakers could raise interest rates half a point at their next meeting later this month. Bond yields soared and stocks sold on the news.
–Darla Mercado, Gina Francolla
11 hours ago
US stock futures open flat on Tuesday
US stock futures were flat on Tuesday night.
Dow Jones Industrial Average futures were up 17 points, or 0.05%. S&P 500 and Nasdaq 100 futures rose 0.03% and 0.07%, respectively.
—Hakyung Kim
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