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Stocks, U.S. yields up as investors digest Fed comments

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A gauge of global stocks erased early losses and turned higher on Monday to build on its biggest weekly percentage gain in two years and U.S. bond yields rose as investors digested comments from Fed officials to try and determine the central bank’s path of rate hikes.

Equities rallied last week and U.S. Treasury yields tumbled after consumer price data indicated stubbornly high inflation may finally be starting to slow.

But Federal Reserve Governor Christopher Waller said on Sunday that though the central bank may consider slowing the pace of rate increases at its next meeting, that should not be taken as a “softening” in the fight to bring down inflation, and while the data was “good news” it was “just one data point.”

But Vice Chair Lael Brainard said on Monday the central bank would likely slow its interest rate hikes soon, helping equities to move higher, while bond yields moved modestly lower.

“That is consistent with what the market’s already been telling us,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab in Texas, referring to expectations the central bank will raises rates by 50 basis points at its December meeting.

“When someone who is a part of the committee who makes that decision reiterates what the market is telling us, that gives people some confidence to potentially go in and buy (stocks).”

On Wall Street, the S&P 500 advanced after recording its biggest weekly percentage gain since June last week, led by healthcare (.SPXHC) names Pfizer (PFE.N), up 4.20% and Johnson & Johnson (JNJ.N), which gained 2.10%.

The Dow Jones Industrial Average (.DJI) rose 133.04 points, or 0.39%, to 33,880.9, while the S&P 500 (.SPX) gained 9.07 points, or 0.23%, to 4,002 and the Nasdaq Composite (.IXIC) added 3.87 points, or 0.03%, to 11,327.20.

The pan-European STOXX 600 index(.STOXX) closed up 0.14% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.17%.

Investors will get another look at inflation when the U.S. producer price index is released on Tuesday.

Benchmark 10-year notes were up 4.9 basis points to 3.878% from 3.829% late on Thursday. The bond market was closed for the Veterans Day holiday on Friday.

The two-year yield was up 8.6 basis points at 4.412%, from 4.326%

In contrast, dovish comments from European Central Bank policymaker Fabio Panetta and Cypriot policymaker Constantinos Herodotou helped send European bond yields lower, although short-dated rates remained near multi-year highs hit recently.

Germany’s 2-year government bond yield , was up 0.6 basis points at 2.123% from 2.116%, after climbing to 2.252% last week, its highest since 2008.

After its biggest weekly percentage drop since March 2020 last week, the dollar index fell 0.056% as the greenback relinquished earlier gains, with the euro unchanged at $1.0352.

U.S.-listed Chinese stocks gained on reports regulators have asked financial institutions to extend more support to stressed property developers amid signs the government may be starting to relax some of its strict COVID-19 policies. E-commerce firm shares were up 2.35%.

U.S. President Joe Biden met Chinese leader Xi Jinping in person on Monday for the first time since taking office on the sidelines of the Group of 20 (G20) summit, with both stressing the need for a better dialogue between their nations and the two sides establishing a mechanism for more frequent communications.

In cryptocurrencies, bitcoin last fell 1.48% to $16,506.00 after falling below $16,000 for the first time since Thursday as investors continue to assess the fallout from last week’s collapse of crypto exchange FTX.

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