Investors face a different set of circumstances than the past 30 years when after six months of rates peaking, the Fed would cut, said Dec Mullarkey, managing director of investment strategy & asset allocation at SLC Management in Boston. "That playbook is a bit outdated." Mullarkey said. "The economy we have going is much stronger and much more different because of labor shortages than it has been in other typical cycles." Retail sales fell 1.0% last month, the Commerce Department said. Data for February was revised up to show retail sales falling 0.2% instead of 0.4% as previously reported. Gold pulled back from near record highs as the dollar bounced and Fed Governor Christopher Waller added weight to the prospect of another rate hike, saying the central bank's lack of progress on slowing inflation meant rates needed to move higher. "The Fed is going to stay higher than it's forecast. They're going to hike one more time in May, then they're going to go on pause," said Brad Conger, deputy chief investment officer at Hirtle Callaghan & Co.
Futures priced in a 79.5% chance the Fed raises its lending rate by 25 basis points when policymakers conclude a two-day meeting on May 3, up from 67% on Wednesday, CME Group's FedWatch Tool showed. The yield on two-year Treasuries, which move in step with interest rate expectations, jumped 12.8 basis points to 4.105%, while on 10-year notes they rose 7.1 basis points to 3.522%.
The dollar index rose 0.584%, with the euro down 0.43% to $1.0996.
GUIDANCE UNCERTAIN Major U.S. stock indexes fell as financials limited losses in the S&P 500 after shares of JPMorgan Chase and other banks rallied following their quarterly results. "The first quarter is going to be better than lowered expectations, which is good, but the guidance at best will be uncertain," Conger said. JPM Chief Executive Jamie Dimon said he expected the tumult from bank failures in March to pass, but "you still see sticky inflation and then in front of us issues like higher rates, the war in Ukraine -- those are still substantial concerns."
MSCI's gauge of stocks across the globe shed 0.20%, while the Dow Jones Industrial Average fell 0.54%, the S&P 500 lost 0.33% and the Nasdaq Composite dropped 0.48%. In Europe, the broad STOXX 600 index rose for a fifth session in a row and closed up 0.58%. Asian shares gained after the Monetary Authority of Singapore (MAS) surprised many by leaving policy unchanged, saying the tightening already underway would ensure inflation slowed sharply later this year. Atlanta Fed President Raphael Bostic told Reuters that one more quarter percentage point interest rate hike could allow the Fed to end its tightening cycle. The euro benefited from expectations that the ECB will continue to raise rates, after data on Thursday showed euro zone industrial output was stronger than expected in February. The euro was down 0.45% to $1.09985 after earlier hitting its highest in around a year. European government bond yields were set for a weekly rise. The benchmark 10-year German yield was at 2.426%, on track for its biggest weekly rise so far in 2023 . Oil prices rose, headed for a fourth straight week of gains, after the West's energy watchdog said it expected global demand to rise to a record high this year on the back of a recovery in Chinese consumption. U.S. crude settled up 36 cents at $82.52 a barrel, while Brent rose 22 cents to settle at $86.31. U.S. gold futures settled 1.9% lower at $2,015.80 an ounce.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Asia stock markets Asia-Pacific valuations U.S. inflation Fed, inflation, rate markets Consensus grows for Fed rate hike in May Rising gold price ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Herbert Lash, addition reporting by Elizabeth Howcroft and Wayne Cole; Editing by Alexander Smith David Holmes and Nick Zieminski)
Messaging: herb.lash.reuters.com@reuters.net))