“We would say at best it’s 50 per cent, potentially lower,” Hoxha said.
She said there’s still a risk that the Fed will have to hold a tougher line on rates than markets expect if the US labour market remains tight. That gives her pause as stock and bond prices rally so strongly around the world.
“It does feel like the market wants to pick pennies in front of a steamroller,” she said.
Thursday’s rally stretched across the Atlantic, where markets rose after central banks for Europe and the United Kingdom also raised rates in their efforts to squelch inflation.
The European Central Bank raised its key rate by 0.50 percentage points and said another would arrive next month. The Bank of England also raised its key rate by half a percentage point and said it’s seeing signs that inflation has turned the corner, though it also stressed it’s too soon to declare victory over inflation.
European stocks rallied, with the German DAX returning 2.2 per cent. The FTSE 100 in London was up 0.8 per cent.
Moves in Asia were more modest, with Hong Kong’s Hang Seng down 0.5 per cent and Japan’s Nikkei 225 up 0.2 per cent.
The next big event for Wall Street will be a suite of earnings reports from Big Tech companies coming after trading closes on Thursday, including Apple, Amazon and Google’s parent company, Alphabet. Each rose more than 3 per cent. Because these stocks are the biggest by value, their movements carry more sway on the S&P 500 and other indexes.
After those will be Friday’s jobs report, where economists expect to see a slowdown in hiring. The job market has largely remained resilient even in the face of swift rate hikes by the Fed over the last year.
Big tech companies have announced high-profile layoffs recently, but a report on Thursday suggested job cuts are not that widespread. Fewer workers applied for unemployment benefits last week than expected, and the number dropped to its lowest level since April.
Treasury yields dipped further on Thursday, an indication of expectations for an easier Fed. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, fell to 3.36 per cent from 3.42 per cent late on Wednesday. The two-year yield, which moves more on expectations for the Fed, fell to 4.07 per cent from 4.10 per cent.
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
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