US Two-Year Yield Hits 4.9% After Economic Data: Markets Wrap

(Bloomberg) -- Treasury yields rose as investors weighed a raft of economic figures for clues on the outlook for the Federal Reserve's next steps.

Two-year yields hit 4.9% after data showed US short-term inflation expectations climbed to an eight-month high in November. The S&P 500 pared gains. Microsoft Corp. advanced on news Sam Altman will return to lead OpenAI. Nvidia Corp. dropped after its results. Oil tumbled after the OPEC+ delayed this weekend's meeting as talks over output levels ran into trouble.

Applications for US jobless benefits fell last week after a run of increases, a slight reprieve in what otherwise has been a gradually cooling labor market. Durable goods orders declined in October by more than expected as commercial aircraft bookings retreated and demand weakened for business equipment.

Equities have bounced this month as investors bet that the Fed is finally done raising interest rates. Minutes of the Fed's latest meeting showed policymakers united around a strategy to “proceed carefully” on future rate moves and base any tightening on progress toward their inflation goal.

The S&P 500 will rally to a record high next year, helped by positive sentiment and resilient valuations, according to Lori Calvasina at RBC Capital Markets.

“The sentiment set up is constructive for now,” Calvasina wrote in a note, saying that an indicator of investor appetite that's proved reliable in 2023 is sitting in a range typically followed by 10% gains in the S&P 500 over 12 months. “Valuations can stay higher than many investors realize,” as cooling inflation should support price-to-earnings multiples, she wrote.

Corporate Highlights:

• Deere & Co. forecast smaller-than-expected profit next year, with slowing equipment demand from farmers starting to weigh on the world's largest tractor maker.
• Autodesk Inc. was downgraded by Piper Sandler after the company's tepid growth rate and tempered margin expectations.
• Guess? Inc., a clothing company, reported net revenue that missed estimates.
• Nordstrom Inc., a department store chain, reported total revenue that missed estimates.
• Urban Outfitters Inc., a clothing retailer, reported comparable sales for its namesake banner that missed estimates.
• Virgin Galactic Holdings Inc. was downgraded by Morgan Stanley, which noted the rocket company has no planned revenue-generating flights from mid-2024 to 2026.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 10:02 a.m. New York time
• The Nasdaq 100 rose 0.3%
• The Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 rose 0.2%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.5%
• The euro fell 0.5% to $1.0861
• The British pound fell 0.6% to $1.2469
• The Japanese yen fell 0.8% to 149.52 per dollar

Cryptocurrencies

• Bitcoin fell 1.4% to $36,325.52
• Ether rose 1.8% to $2,021.91

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.40%
• Germany's 10-year yield declined two basis points to 2.54%
• Britain's 10-year yield advanced three basis points to 4.13%

Commodities

• West Texas Intermediate crude fell 4.9% to $73.94 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Rob Verdonck, Tassia Sipahutar, Robert Brand and Sagarika Jaisinghani.

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