The stock market experienced a volatile week but was down only slightly from last week as investors eagerly awaited signs that the Federal Reserve’s rate hiking cycle is approaching its end. Mixed economic data played a role, with Thursday’s U.S. jobless claims hitting their highest level since October 2021, while producer prices rose less than anticipated, indicating that policy tightening measures might finally be taking effect. The market’s sideways movement can be attributed to the high risk of a recession, yet a lack of concrete evidence in the hard data.
Despite the Federal Reserve’s aggressive tightening measures, inflation remains high – leading to a delicate balancing act for policymakers to avoid a recession. As a result, swap traders are now pricing in a higher chance of an interest rate hike at the next Federal Reserve meeting. This uncertainty contributed to the climb in yields, with the two-year reaching 4.00% and the 10-year rising to 3.45% on Friday.
Oil futures settled lower on Friday, extending a four-week decline as concerns over the global economic outlook and uncertain demand weighed on prices. Additionally, doubts surrounding Asian economic growth, weaker refinery margins, and supply dynamics contributed to the negative sentiment. Analysts believe that resolving the debt ceiling crisis, increased activity in China, and improved inflation readings could potentially lead to a recovery in oil prices.