Marketbites: Britain's Inflation Remains Stubbornly High
Portfolio Manager Commentary:
Stocks ended higher Thursday after a turbulent trading session as traders bet that the Federal Reserve may be nearing the end of its rate hiking cycle. Technology stocks outperformed as investors reduced their Fed hike bets and Treasury yields declined, with the SPDR Technology Select Sector (XLK) gaining 1.63%. Microsoft, Nvidia, and Apple all climbed higher. Tech had previously been the hardest hit part of the market as the Federal Reserve raised rates nine straight times in about a year. The Fed's less hawkish stance on rate hikes this month is causing investors to rotate back into tech shares.
The Fed hiked rates by 25 basis points on Wednesday, as expected. It also hinted that its inflation-fighting tightening campaign could be nearing the end, with the removal of the phrase “ongoing increases” from its statement. While Powell said that "rate cuts are not in our base base" for the remainder of 2023, traders priced in expectations of the central bank lowering rates this year.
“Even if the banking woes have been contained and the deposit flight is over, I don’t think they’ll prove to be the only set of headlines that pose risks to the economy,” wrote Liz Young, head of investment strategy at SoFi. “What might be more likely in coming months is some sort of credit problem as companies’ debt matures and they need to refinance their operations at much higher rates than before.”
Chart of the Day:
Britain’s inflation continues to be stubbornly high. Price increases in February picked up to 10.4% from 10.1% in January as the cost of food rose at the fastest pace since records began in 1989. That left the U.K. with the highest rate of inflation among the Group of Seven wealthy democracies.
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