Equities gain while Treasury yields fall on data, talk of Fed rate cuts

Equities gain while Treasury yields fall on data, talk of Fed rate cuts

MSCI's global equities index was gaining slightly on November 29 while Treasury yields fell as third quarter data provided encouraging signs for the economy even as US Federal Reserve officials provided mixed messages on monetary policy.

Commerce Department data showed US gross domestic product(GDP) rose at a 5.2% annualized rate last quarter, revised up from the previously reported 4.9% pace and marking the fastest pace of expansion since the fourth quarter of 2021.

The GDP report also confirmed inflation was trending lower, with slight downward revisions to measures watched by the Fed for monetary policy, suggesting a so-called Goldilocks scenario to Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions.

"The improving data is earning the possibility of some recalibration of policy next year. That's what the market is pricing in. If the data continues on this path it will earn modest rate cuts next year. That's helping to ignite risk appetites," said Melson.

While the tone from Federal Reserve officials' comments on November 29 was mixed, investors still focused on comments made on November 28 by Fed Governor Christopher Waller – an influential and previously hawkish voice at the US central bank. Waller had said rate cuts could begin in months if inflation keeps easing.

On November 29 the Fed's Bank of Atlanta President Raphael Bostic said he expects US growth to slow and inflation to continue to ease on the back of tight monetary policy.

But in contrast, Richmond Federal Reserve Bank President Thomas Barkin on November 29 said he is "skeptical" that inflation is on its way down to 2%, and wants the option of another rate hike in case inflation gains steam.

On Wall Street, the Dow Jones Industrial Average rose 27.39 points, or 0.08%, to 35,444.37; the S&P 500 gained 4.81 points, or 0.11%, to 4,559.7; and the Nasdaq Composite added 6.98 points, or 0.05%, to 14,288.74.

The pan-European STOXX 600 index rose 0.43% and MSCI's gauge of stocks across the globe gained 0.11%.

In US Treasuries, yields were lower with the benchmark 10-year note on track for a third straight session of declines, as the economic data failed to derail expectations that a Fed rate cut could be on the horizon.

US 10-year notes were down 3.8 basis points to 4.298%, from 4.336% late on Tuesday while the 30-year bond was last down 3.4 basis points to yield 4.4904% and the 2-year note was last was down 6.6 basis points to yield 4.6702%.

In currencies, the dollar index, which tracks the currency against six peers, earlier hit its lowest since early August before reversing course.

The dollar index rose 0.273%, with the euro down 0.21% to $1.0967 while the Japanese yen strengthened 0.04% versus the greenback at 147.41 per dollar. Sterling was last trading at $1.2681, down 0.09% on the day.

Oil prices rose on November 29 as supply disruption caused by a storm in the Black Sea combined with lower US inventories to drive buying while investors waited for an OPEC+ meeting where output policy is expected to be decided on Thursday.

US crude recently rose 0.89% to $77.09 per barrel and Brent was at $82.24, up 0.69% on the day.

Elsewhere, gold shot to a roughly seven-month high of $2,051 an ounce.

Spot gold was up 0.05% to $2,041.89 an ounce. US gold futures gained 0.15% to $2,043.00 an ounce.