By Stephen Culp
NEW YORK (Reuters) – Wall Street rallied on Thursday, with benchmark U.S. Treasury yields hitting their highest level since May, as stocks rallied following the Federal Reserve's hawkish outlook.
Crude oil prices fell and gold rallied as investors grew accustomed to the reality that the central bank will take a slower, more measured approach to easing its policies over the next year.
The caution given by the Federal Reserve's economic projections and the expected slowdown in rate cuts led to the biggest sell-off in US stocks in months on Wednesday.
“Those larger measures indicate that some investors are concerned that (Fed Chairman Jerome) Powell's comments suggest that perhaps the Fed is considering not cutting rates further,” said Bill Merz, head of research at US Bank Wealth Management capital markets in Minneapolis.
“The market was seen reacting to specific words that Jerome Powell spoke during the press conference, which emphasizes the fact that there is a lot of speculation happening in real time, with investors trying to decipher what the Federal Reserve really means” Merz added.
Other central banks wrapped up a choppy year of rate decisions, with the central banks of England, Japan, Norway and Australia holding firm, and Switzerland and Canada implementing 50 basis point cuts. Sweden's Riksbank reduced its official interest rate by 25 basis points, as did the European Central Bank last week.
On the economic front, an unexpected upward revision to third-quarter US GDP, a drop in jobless claims and a surprise upside in existing home sales underscored US economic strength.
“Overall, what happened at the Federal Reserve was good news,” said Thomas Martin, senior portfolio manager at GLOBALT in Atlanta. “They are working on inflation, the economy is strong, the final GDP figure of 3.1% is not bad.”
They rose 189.30 points, or 0.47%, to 42,527.15, rose 18.60 points, or 0.34%, to 5,892.41 and rose 55.47 points, or 0.31%, to 19,453.77. .
European stocks plunged, setting course for their biggest percentage drop in five weeks, as the Federal Reserve's hawkish signal sent investors fleeing riskier assets.
MSCI's gauge of global stocks fell 3.70 points, or 0.44%, to 841.74.
The index fell 1.51%, while the broad European index fell 30.90 points, or 1.51%.
Emerging market stocks fell 12.45 points, or 1.14%, to 1,082.86. MSCI's broadest index of Asia-Pacific shares outside Japan closed down 1.41% at 572.84, while it fell 268.13 points, or 0.69%, to 38,813.58 .
10-year Treasury yields jumped more than 4.5% to the highest level since May and the yield curve steepened to its widest gap in more than two years amid the U.S. central bank's more measured approach. .US regarding interest rate cuts in the coming year. .
The US benchmark 10-year bond yield rose 5.8 basis points to 4.556%, from 4.498% on Wednesday.
The 30-year bond yield rose 6.9 basis points to 4.7294% from 4.66% on Wednesday.
The two-year bond yield, which typically moves in step with the Federal Reserve's interest rate expectations, fell 4.7 basis points to 4.308%, from 4.355% late Wednesday.
The dollar reversed an earlier pullback and last rose nominally against a stagnant basket of global currencies as the market digested the Fed's colder approach to easing.
The , which measures the dollar against a basket of currencies that includes the yen and euro, rose 0.11% to 108.38, and the euro rose 0.12% to $1.0364.
Against the Japanese yen, the dollar strengthened 1.69% to 157.41.
extended its liquidation following the Federal Reserve's decision on Wednesday.
In cryptocurrencies, bitcoin fell 4.43% to $96,569.00. decreased by 7.86% to $3,401.20.
Oil lost ground as central bankers in the United States, Europe and Asia issued cautionary notes about easing monetary policy, raising concerns about a slowdown in global demand.
fell 0.95% to $69.91 per barrel, while it closed at $72.88 per barrel, down 0.69% on the day.
Gold advanced but pared earlier gains after U.S. economic data reinforced expectations that the Federal Reserve will take a cautious approach to monetary policy next year.
rose 0.44% to $2,599.07 an ounce. The United States fell 1.69% to $2,592.00 an ounce.
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