- US stocks jumped and yields tumbled on Friday.
- Stocks are on track for their best week since the election, with the S&P 500 headed for a gain of nearly 3%.
- Encouraging inflation data sent bond yields tumbling as markets revived rate-cut bets.
US stocks gained on Friday, with the market on track for its best week since the November election.
Equities rose sharply to cap off the week amid a drop in bond yields as rate-cut views brightened after the latest inflation data.
The lower-than-expected inflation report sparked a tumble in the 10-year Treasury yield and revived investor hopes of interest rate cuts from the Federal Reserve this year.
The 10-year yield declined three basis points on Friday to 4.59%. The yield is down about 22 basis points since hitting a 52-week high of 4.82% on Tuesday.
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Monday:
According to the CME FedWatch Tool, the odds of two 25-basis point interest rate cuts by the end of the year have jumped to 32%, up from 22% a week ago.
Rate cut bets were fueled further this week by Federal Reserve Governor Christopher Waller, who told CNBC on Thursday that interest rates could be cut multiple times this year, with the first cut coming in the first half.
“As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in,” Waller said.
Fundstrat’s Tom Lee said this week marked a turning point for investors who have been increasingly concerned about the risk of sticky inflation and no interest rate cuts.
“We saw favorable CPI readings which quell inflation hysteria,” Lee said, adding that depressed levels of investor sentiment represent signs of market capitulation.
The number of bullish respondents to the AAII Investor Sentiment Survey plunged to 25.4% for the week ended January 15, which is well below the historical average of 37.5%. Meanwhile, bearish respondents surged to 40.6%, above the historical average of 31.0%.
Another sentiment indicator, the CNN Fear & Greed Index, is at 29, representing overall “Fear” among stock market investors.
The stock market is closed on Monday, January 20, in observance of Martin Luther King Jr. Day.
Here’s what else is going on:
In commodities, bonds, and crypto:
- West Texas Intermediate crude oil dropped 0.50% to $77.46 a barrel. Brent crude, the international benchmark, was lower by 0.62%, at $80.79 a barrel.
- Gold declined 0.43% to $2,739.20 an ounce.
- The 10-year Treasury yield was down 3 basis points at 4.597%.
- Bitcoin jumped 2.80% to $102,777.
