Leading U.S. indexes were nearly unchanged in early trading Friday as investors weighed the Federal Reserve’s next move amid record U.S. inflation, CNBC reports.
The blue-chip Dow Jones Industrial Average advanced 0.43 percent, or 150.06 points, to 35,391.65 points.
The broad barometer S&P 500 gained 0.16 percent, or 7.14 points, to 4,511.12 points.
The Nasdaq Composite technology index rose 0.02%, or 3.26 points, to 14,188.9 points.
Thursday’s trading session was marked by selling, with the yield on the 10-year U.S. Treasury note, known as one of the most stable financial instruments, reaching 2%.
Official statistics showed that the rise in US prices reached a 40-year high in January at 7.5 per cent. The result motivated St. Louis Fed Governor James Bullard to call for a faster pace of rate hikes – by a full percentage point in early July.
“We were just starting to see confidence in the markets strengthen, and investors seemed to be resigning themselves to the prospect of four or five rate rises this year, but the relentless and widespread price rises in the US delivered another hammer blow and destroyed the momentum that had been building,” says Craig Erlam, senior market analyst for the UK, Europe, Middle East and Africa for Oanda, in an emailed comment to Investor.bg.
“We are now entering very uncomfortable territory and the very real prospect of multiple rate hikes before the summer, as well as a 50 basis point hike to start in March,” he adds.
Fed officials interviewed by CNBC’s Steve Laisman indicated that they did not think a 50 basis point increase was appropriate. Fed governors in Atlanta, Richmond and San Francisco rejected the idea of two rate hikes.
“The Fed has a Goldilocks and the Three Bears-type problem, because it’s clear that [the central bank] needs to back away quickly and permanently from [monetary] policy that is too loose,” says Rick Ryder, chief investment officer for global fixed income at BlackRock. He believes the time has come for the US central bank to take a more neutral and appropriate stance, but that could be a challenge for bankers.
Goldman Sachs has changed its expectations for the Fed, predicting seven rate hikes this year in a bid to cool an economy that is generating more resilient inflation than expected.
“Inflation should become more moderate this year as the pandemic supply-demand imbalances recede and commodity prices normalize, but it is uncertain when that will happen, and the recent inflation trend has been very robust,” Goldman economists David Merkle and Ian Hatsius wrote in a note.