The world's largest bond market experienced a day of reversals, with Treasuries paring their weekly rally as strong economic data reinforced the view that the Federal Reserve may be premature in declaring victory over inflation.
A report showed consumer sentiment soared to an almost two-year high, while short-term price expectations rose, at the end of a week marked by optimism that the Fed would be closer to ending its interest-rate hikes. Bonds reacted immediately, with the front end of the US curve bearing the brunt of the selling. Stocks fell slightly as traders cited "consolidation" following a rally that still drove the S&P 500 to its best week since mid-June.
The US two-year yield, which is more sensitive to upcoming central bank moves, rose 13 basis points to 4.76%. This is in stark contrast to the recent rate declines. The dollar rose slightly, reversing its biggest weekly loss since November.
Investors also scrutinized earnings from JPMorgan, Wells Fargo, and Citigroup, all of which benefited from higher interest rates but easily outperformed lower analyst estimates. UnitedHealth Group stock rose as profits allayed concerns about rising medical costs. AT&T fell to a 29-year low amid growing concerns about the phone company's potentially higher costs.
Equity strategists are raising earnings forecasts for the S&P 500 faster than they are lowering them, pushing a key indicator tracking the momentum of analyst revisions well above its November low.