More signs have appeared on Wall Street, with signals that the Federal Reserve's war on inflation isn't destroying the economy – at least not yet, with traders sending Treasury yields skyrocketing amid bets on further tightening.
Bond prices fell across the yield curve, with two-year yields rising 15 basis points to 4.86%. Swap markets now predict a nearly 50% chance of another Fed hike before the end of the year. The value of the dollar increased. The S&P 500 advanced slightly, but equities remain volatile as traders adjust their positions at the end of the quarter.
Banks led gains after the Fed's stress test, which cleared the way for payouts. Wells Fargo and JPMorgan both increased by at least 3.5%. The Nasdaq 100 underperformed after rising more than 35% this year due to artificial intelligence hype. Micron Technology fell as investors worried about the chipmaker's slow recovery from an inventory glut. The small-cap Russell 2000 Index gained 1.2%, marking its fourth consecutive gain.
The readings on jobless claims and GDP on Thursday showed that the US economy is in better shape than many had predicted at the start of 2023. While key inflation indicators closely monitored by the Fed have been revised downward slightly, they remain well above the central bank's 2% target.