Stocks Climb on Bets Fed Is Ready to Take a Break

‘Dot Plot’

In addition to the Fed decision on rates, investors’ focus will be on the central bank’s quarterly so-called dot plot in its Summary of Economic Projections.

“Raising the ‘dots’ for both 2023 and 2024 would signal an intention to leave rates higher for longer, while also giving the doves on the committee another few weeks to prove that inflationary pressures are waning,” the UBS Chief Investment Office added.

The consumer price index and the core CPI — which excludes food and energy — decelerated on an annual basis. However, a key gauge of prices closely watched by the Fed continued to rise at a concerning pace.

“Today’s US CPI has likely sealed the deal for a ‘hawkish hold’ from the Fed on Wednesday,” said Matthew Weller at FOREX.com and City Index. “With no upside surprises to inflation, it looks likely that Jerome Powell and company will follow through on their recent comments favoring a ‘skip’ in the interest rate hiking cycle tomorrow, while leaving the door open for a potential resumption of rate increases next month if the data dictates.”

Bank of America Corp.’s latest global survey of fund managers showed investors are “exclusively long” tech stocks amid the buzz around artificial intelligence.

Long Big Tech was the most-crowded trade, according to 55% of the participants, the strongest conviction since 2020.

Still, fund managers remain broadly underweight on stocks as sentiment — measured by cash levels, economic growth expectations and asset allocation — remains “stubbornly low,” BofA strategist Michael Hartnett wrote in a note.

Investors cut equity allocation to a five-month low.

Key events this week:

• Eurozone industrial production, Wednesday
• U.S. PPI, Wednesday
• Federal Reserve rate decision, updated economic forecasts, Jerome Powell’s press conference, Wednesday
• IEA oil market report, Wednesday
• China property prices, retail sales, industrial production, Thursday
• European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
• U.S. initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
• Bank of Japan rate decision, Friday
• U.S. University of Michigan consumer sentiment, Friday

Stocks

• The S&P 500 rose 0.5% as of 2:54 p.m. New York time
• The Nasdaq 100 rose 0.6%
• The Dow Jones Industrial Average rose 0.3%
• The MSCI World index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.3% to $1.0787
• The British pound rose 0.7% to $1.2599
• The Japanese yen fell 0.5% to 140.23 per dollar

Cryptocurrencies

• Bitcoin fell 0.1% to $25,867.5
• Ether was little changed at $1,739.87

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 3.83%
• Germany’s 10-year yield advanced three basis points to 2.42%
• Britain’s 10-year yield advanced 10 basis points to 4.43%

Commodities

• West Texas Intermediate crude rose 2.9% to $69.10 a barrel
• Gold futures fell 0.7% to $1,955.10 an ounce

This story was produced with the assistance of Bloomberg Automation.

 –With assistance from Julien Ponthus, Peyton Forte, Allegra Catelli, Blaise Robinson, Carly Wanna, Emily Graffeo, Brett Miller, Tassia Sipahutar, John McCorry, John Viljoen, Isabelle Lee, Cecile Gutscher and Sagarika Jaisinghani.