Global Stocks Rise on U.S. Bank Earnings, Fed Rate Cut Hopes as Treasury Yields Decline

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NEW YORK, – Global stocks rallied on Friday, buoyed by positive U.S. bank earnings reports, and positioned for a weekly gain. Meanwhile, U.S. Treasury yields edged lower following inflation and consumer confidence data, which reinforced expectations of forthcoming interest rate cuts by the Federal Reserve.

The U.S. Producer Price Index (PPI) for final demand remained flat in September, slightly below analysts’ expectations of a 0.1% increase, indicating that inflation pressures are easing. This follows an unchanged 0.2% increase in August, suggesting that the Federal Reserve has some leeway to continue reducing interest rates. On an annual basis, PPI rose by 1.8% in September, compared to an estimated 1.6%, reflecting a slight cooling in input prices.

The U.S. Consumer Price Index (CPI) earlier showed a minor uptick, driven by rising goods costs, while the University of Michigan’s preliminary reading on consumer sentiment fell to 68.9 for October, down from 70.1 in September, as higher prices weighed on consumer confidence. The mixed data points have contributed to market speculation that the Fed will likely cut rates by 25 basis points in its next meeting.

On Wall Street, stocks climbed as the quarterly earnings season began. The Dow Jones Industrial Average rose by 409.74 points, or 0.97%, to 42,863.86, while the S&P 500 gained 34.98 points, or 0.61%, to reach 5,815.03. The Nasdaq Composite also advanced, adding 60.89 points, or 0.33%, to close at 18,342.94. Banking stocks led the rally, with the banking sector index (.SPXBK) jumping 4.21%—its largest single-day gain since May 2023—driven by strong performances from JP Morgan, up 4.44%, and Wells Fargo, up 5.61%.

“The earnings growth we’re seeing now reflects a broader market recovery, not just concentrated gains in a few tech stocks,” said Craig Sterling, head of U.S. equity research at Amundi U.S. “Today’s bank results indicate that the broader economic environment is stabilizing.”

Despite the gains, Tesla shares dropped by 8.78% after the company’s highly anticipated robotaxi event failed to meet investor expectations with concrete details. This decline capped the overall market rally, highlighting mixed investor sentiment as earnings season unfolds.

Global Markets on the Upswing Amid Stimulus and Rate Cut Expectations

Across the Atlantic, European markets also saw a positive close, with the STOXX 600 index rising 0.55% as investors shifted their attention to China’s fiscal stimulus measures, European Central Bank (ECB) monetary policy, and corporate earnings. The ECB is widely expected to announce a rate cut in the coming week, a move aimed at bolstering economic growth in the Eurozone.

MSCI’s index of global stocks (.MIWD00000PUS) gained 0.54%, extending its recent gains to four out of the last five weeks. The index was on track to secure its fourth weekly rise as easing inflation and solid corporate earnings boosted investor confidence.

Treasury Yields and Currency Movements Reflect Market Sentiment

U.S. Treasury yields experienced volatility but ultimately drifted lower, reflecting market uncertainty over the Fed’s next steps. The benchmark 10-year Treasury note yield fell by 0.5 basis points to 4.089%, while the 2-year yield, which more closely tracks interest rate expectations, dropped by 5 basis points to 3.949%. Despite the decline, the 10-year yield remained on course for a fourth consecutive weekly increase, underscoring investor caution.

In the currency markets, the U.S. dollar held steady, with the dollar index nudging up 0.05% to 102.94. The euro edged down slightly to $1.0932, while the British pound saw a marginal gain, trading at $1.3065. The dollar also strengthened against the Japanese yen, reaching 149.15 yen. The greenback’s resilience comes as investors weigh the implications of recent U.S. economic data and the likelihood of further rate adjustments.

Oil Prices Dip, but Weekly Gains Hold Amid Global Supply Concerns

Oil prices fell on Friday but managed to secure a second consecutive weekly gain as market participants weighed the impact of hurricane disruptions in the U.S. against potential supply issues stemming from geopolitical tensions. U.S. crude futures settled down 0.38% at $75.56 per barrel, while Brent crude closed 0.45% lower at $79.04 per barrel.

The recent tensions in the Middle East, including the ongoing Israel-Hamas conflict, have added to market uncertainties, with fears that an escalation could impact global energy supplies. The situation has led to a cautious stance among traders, balancing near-term demand fluctuations against potential long-term supply disruptions.

As markets continue to digest a mix of economic data, corporate earnings, and geopolitical developments, investors remain focused on central bank actions and the potential for further monetary easing to support global growth. The coming weeks, with key announcements from the Fed and the ECB, will be critical in shaping market direction.

Source: Reuters