By Thornton McEnery and William Watts
Fed-funds futures on Thursday showed the chances of the Federal Reserve delivering five 25-basis-point rate hikes by year-end had risen to nearly 33% from 22% Tuesday, according to the CME FedWatch Tool.
Powell also refused to rule out the prospect of half a percentage point, rather than quarter-point, increases in rates over the course of the hiking cycle.
The yield on the 2-year Treasury /zigman2/quotes/211347045/realtime BX:TMUBMUSD02Y +0.72% , surged 10.1 basis points Thursday to 1.190%, its biggest daily yield climb since March 10, 2020, according to Dow Jones Market Data.
Powell’s comment that his core PCE inflation forecast had increased by about 20 basis points since December equates to a roughly 30 basis point increase in projected fed-funds rate, said Lawrence Dyer, head of U.S. rates strategy at HSBC.
He said fed-funds futures for the end of 2022 are up a bit more than that, which could mean that the yields could reverse in the next few days.
In other U.S. data, orders for durable goods fell a larger-than-expected 0.9% in December, while initial claims for U.S. unemployment benefits fell by 30,000 last week to 260,000, signaling that disruptions in the labor market tied to omicron are starting to fade.
Pending home sales dropped 3.8% in December , according to the monthly index released by the National Association of Realtors.
Investors were also reacting to a deluge of earnings, while Apple Inc. /zigman2/quotes/202934861/composite AAPL +2.45% was due to deliver results after the closing bell.
Companies in focus
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Electric car maker Tesla Inc. TSLA late Wednesday delivered a report that showed a stronger profit than forecast but cautious guidance on the supply-chain snags in microchips. Shares fell 11.6%.
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Shares of McDonald’s Corp. /zigman2/quotes/203508018/composite MCD +1.77% were down 0.4% after the fast-food giant reported fourth-quarter earnings and revenue that missed expectations .
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Microchip equipment maker Lam Research Corp. /zigman2/quotes/208077897/composite LRCX +6.16% said supply-chain conditions worsened in late December . Shares dropped 6.9%.
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Zero-commission app Robinhood Markets Inc. /zigman2/quotes/228268942/composite HOOD +0.25% is set to report earnings after Thursday’s closing bell ,one day before the anniversary of its decision to halt trading on meme stocks, shares were down 6.5%.
How other assets performed
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The yield on the 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +0.81% fell 3.8 basis points to 1.807% as of 3 p.m. Eastern. Yields and debt prices move opposite each other.
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The ICE U.S. Dollar Index /zigman2/quotes/210598269/delayed DXY -0.10% , a measure of the currency against a basket of six major rivals, jumped 1.3%, trading at its highest since July 2020.
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Oil futures /zigman2/quotes/211629951/delayed CL.1 -0.28% fell by 74 cents, or nearly 0.9%, to settle at $86.61 a barrel on the New York Mercantile Exchange, after closing at more-than-seven-year highs on Wednesday. Gold futures /zigman2/quotes/210034565/delayed GC00 +0.38% fell 2%, to settle at $1,793.10 an ounce below the $1,800 an ounce threshold.
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In European equities, the Stoxx Europe 600 /zigman2/quotes/210599654/delayed XX:SXXP +2.62% rose 0.6%, while London’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +2.68% gained 1.1%.
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The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +0.95% fell 1.8%, while the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +2.31% was down 2% and Japan’s Nikkei 225 /zigman2/quotes/210597971/delayed JP:NIK +1.43% dropped 3.1%.
Steven Goldstein contributed reporting.
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