If their predictions are mistaken, which also happens commonly, it could mean that US Treasury yields have already fallen too far since they began declining within the spring. That, in turn, could put pressure on every kind of investments.
How the markets react
On Thursday, for instance, the S&P 500 posted its biggest loss in greater than two weeks after Treasury yields rose.
“As usual, we will be eagerly awaiting the next data point and how the Fed will interpret the data,” said Brian Jacobsen, chief economist at Annex Wealth Management.
On Friday, at the very least, Powell’s speech helped fuel a broad rally on Wall Street. Smaller stocks within the Russell 2000 rose 3%, leading the market. Smaller firms can profit more from lower rates of interest because they should borrow to grow. (Read “Understanding this week’s markets”)
Nvidia and Big Tech stocks also
In the S&P 500 index of huge firms, greater than 80 percent of stocks rose. The biggest gainer was Nvidia, which rose 4.5 percent. The stock had faltered this summer amid concerns that investors had overvalued it and other influential big tech stocks of their mania around artificial intelligence. But Nvidia has recently rebounded ahead of its highly anticipated earnings report, scheduled for next week.
Retailers and restaurants
Most other firms within the S&P 500 have reported better-than-expected earnings this earnings season, as usual. Ross Stores rose 1.8 percent after beating analysts’ earnings and revenue estimates last quarter. But CEO Barbara Rentler also said the retailer’s low- and middle-income customers proceed to feel the pressure of high prices across the economy, at the same time as inflation has eased. That concern has been voiced by many CEOs recently. It helped offset an 8.2 percent plunge at Red Robin Gourmet Burgers, which reported an excellent greater loss than expected last quarter. A slowdown across the restaurant industry was cited as the rationale.
Overall, the S&P 500 rose 63.97 points to five,634.61. The Dow jumped 462.30 to 41,175.08 and the Nasdaq Composite rose 258.44 to 17,877.79.
Bond and equity markets
In the bond market, the yield on 10-year U.S. Treasury notes fell to three.79% from 3.86% late Thursday. The yield on two-year U.S. Treasury notes, which is more closely tied to expectations for Federal Reserve motion, fell to three.91% from 4.01% late Thursday.
