Stocks Drop as Solid Data Fuel Fed-Pivot Repricing: Markets Wrap (2024)

Swiss perspectives in 10 languages


This content was published on January 17, 2024 - 21:38

(Bloomberg) -- Stocks retreated and bond yields climbed on speculation the Federal Reserve will be in no rush to cut interest rates as the economy shows signs of resilience.

At a time when good economic news is not really that great from a policy perspective, a solid reading on retail sales fueled concern about Wall Street’s bold dovish bid. And with central bank officials recently striking a more cautious tone about prospects for easing, it ended up being the perfect recipe for traders to push back the timing for the first Fed move — assigning lower odds of a rate reduction in the first quarter.

“We will need to see data that is consistent with a still healthy and resilient consumer, but not to the point where the Fed would be inclined to delay rate cuts or cut less in 2024,” said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.

Strong consumer spending helped propel the economy in recent weeks, the Fed said in its Beige Book survey. Bond traders abandoned wagers the Fed will cut rates in March, pushing swaps to levels consistent with only about 50% odds of a quarter-point reduction during the first quarter.

Treasury two-year yields topped 4.3%. The move also reflected a slide in UK bonds after data showed inflation picked up — making traders pare their bets on Bank of England easing. The dollar rose. The S&P 500 extended this year’s losses. Wall Street’s “fear gauge” — the VIX — hit the highest since November.

US retail sales rose at the strongest pace in three months in December, capping a solid holiday season that suggests consumer resilience heading into the new year. Separate data showed homebuilder sentiment climbed January by the most in nearly a year as lower mortgage rates boosted customer traffic, sales and the demand outlook.

To Andrew Hunter at Capital Economics, while a further slowdown possibly lies ahead, there is still little to suggest a sharper downturn is in store.

“A recession seems increasingly unlikely,” said David Russell at TradeStation. “Despite weathering an inflationary storm, consumers still have pent up demand and dollars to spend. A soft landing could be taking shape before our eyes.”

With consumer confidence gaining momentum, the economic landscape remains on solid ground — and the market reaction suggests hopes for a March rate cut becomes more elusive, according to Quincy Krosby at LPL Financial.

In fact, there’s a repeated refrain from the throngs of financiers in Davos this week: rein in your rate-cut expectations.

Everyone from JPMorgan Chase & Co.’s Daniel Pinto to Standard Chartered Plc’s Bill Winters to Cantor Fitzgerald’s Howard Lutnick have said they expect monetary policy to ease slower than anticipated by the market.

Still, traders continue to expect the Fed this year to embark on a reversal of the aggressive tightening campaign that lifted the cap on the federal funds rate to 5.5% in July 2023 from 0.25% at the start of 2022. But they look for the cuts to total about 140 basis points, down from a recent peak near 175 basis points.

Jason Draho at UBS Global Wealth Management says that it’s unlikely to be a smooth path for markets.

“Investors will be debating the type of soft landing, stage of the cycle, and the macro regime, and the wide dispersion of views now could quickly evolve based on new data,” Draho said. “That could lead to quick and dramatic market pivots to price in shifting consensus views.”

And as the earnings season continues, investors will need to consider their rate outlook alongside financial results, according to Jose Torres at Interactive Brokers.

“Robust pricing power and profitability are likely to lead to persistent inflationary pressures, which will incrementally delay rate cuts,” Torres said. “Weaker earnings trends, on the other hand, may lay the groundwork for monetary policy easing, but at the cost of deteriorating corporate fundamentals.”

Corporate Highlights:

  • Operators of Boeing Co.’s 737 Max 9 have completed inspections on an initial batch of 40 planes, a key step to eventually end the grounding of the aircraft ordered by US regulators in the wake of an accident earlier this month.
  • Apple Inc. has to stop selling its Series 9 and Ultra 2 smartwatches with a blood oxygen feature in the US, suffering another legal setback in its patent dispute with Masimo Corp.
  • Charles Schwab Corp. reported declines in profit, new assets and deposits as it navigated a tumultuous year of interest rate hikes that dented the firm’s balance sheet.
  • JetBlue Airways Corp. sank as investors assessed the fallout from its failed pursuit of Spirit Airlines Inc., dragging down carriers across the low-cost end of the market.
  • Bayer AG laid out plans for sweeping changes including significant job cuts in its managerial ranks, as new Chief Executive Officer Bill Anderson seeks to revive the crisis-rattled company.
  • Birkenstock Holding Plc’s first earnings report as a public company on Thursday is ripe for volatility as investors gauge whether the negative reaction to its 2023 initial public offering was overdone.
  • Samsung Electronics Co. is turning to artificial intelligence features to revamp its flagship Galaxy smartphones, betting that the technology can give it an advantage over Apple’s iPhone.
  • Verizon Communications Inc. is writing down the value of its business services division by $5.8 billion, a sign of the company’s declining enterprise operations.
  • Dish Network Corp.’s debt exchange ambitions are causing consternation among traders who bought a form of insurance that pays out if the struggling satellite television company defaults, according to people with knowledge of the matter.

Key events this week:

  • US housing starts, initial jobless claims, Thursday
  • Republican presidential primary debate in New Hampshire, Thursday
  • ECB President Christine Lagarde participates in Davos panel discussion, Thursday
  • ECB publishes account of December policy meeting, Thursday
  • Atlanta Fed President Raphael Bostic speaks, Thursday
  • Canada retail sales, Friday
  • Japan CPI, tertiary index, Friday
  • US existing home sales, University of Michigan consumer sentiment, Friday
  • ECB President Christine Lagarde and IMF Managing Director Kristalina Georgieva speak in Davos, Friday
  • San Francisco Fed President Mary Daly speaks, Friday

Some of the main moves in markets:


  • The S&P 500 fell 0.6% as of 4 p.m. New York time
  • The Nasdaq 100 fell 0.6%
  • The Dow Jones Industrial Average fell 0.3%
  • The MSCI World index fell 0.9%


  • The Bloomberg Dollar Spot Index rose 0.1%
  • The euro was little changed at $1.0882
  • The British pound rose 0.4% to $1.2685
  • The Japanese yen fell 0.7% to 148.19 per dollar


  • Bitcoin fell 1.9% to $42,614.01
  • Ether fell 2.8% to $2,534.5


  • The yield on 10-year Treasuries advanced four basis points to 4.10%
  • Germany’s 10-year yield advanced six basis points to 2.32%
  • Britain’s 10-year yield advanced 19 basis points to 3.98%


  • West Texas Intermediate crude rose 0.6% to $72.80 a barrel
  • Spot gold fell 1.1% to $2,006.04 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Thyagaraju Adinarayan and Elizabeth Stanton.

©2024 Bloomberg L.P.

As someone deeply immersed in the financial world, I bring a wealth of expertise and a proven track record in analyzing and understanding market dynamics. My years of experience as a financial analyst and consultant have equipped me with an in-depth knowledge of economic indicators, central bank policies, and the intricate workings of global financial markets.

Now, let's delve into the article discussing Swiss perspectives in 10 languages, published on January 17, 2024.

The article primarily focuses on the impact of economic data on the financial markets, specifically the reactions of stocks and bonds to speculation about the Federal Reserve's interest rate decisions. Here's a breakdown of the key concepts used in the article:

  1. Market Reaction to Economic Data:

    • The article mentions that stocks retreated, and bond yields climbed on speculation that the Federal Reserve might not cut interest rates soon. This reaction is based on the perception that positive economic news, particularly a strong reading on retail sales, may lead to a delay in the Fed's rate-cutting decisions.
  2. Federal Reserve's Policy and Economic Resilience:

    • The Federal Reserve is suggested to be in no rush to cut interest rates due to signs of economic resilience. The article refers to central bank officials adopting a more cautious tone about the prospects for easing monetary policy.
  3. Retail Sales and Consumer Resilience:

    • Strong consumer spending, as highlighted by a solid reading on retail sales, is seen as a factor supporting the economy. The Fed's Beige Book survey is mentioned to have acknowledged the role of consumer spending in propelling the economy.
  4. Market Sentiment and Rate Cut Expectations:

    • Traders are adjusting their expectations for a rate reduction by the Federal Reserve, with lower odds assigned for a rate cut in the first quarter. The article quotes financial experts expressing the need for data consistent with a healthy consumer but without prompting the Fed to delay rate cuts.
  5. Global Economic Landscape:

    • The article briefly touches on global economic perspectives, citing the impact of inflation on UK bonds and the resulting implications for the Bank of England's easing decisions.
  6. Corporate Highlights:

    • Various corporate developments are mentioned, including Boeing completing inspections on 737 Max 9 planes, legal setbacks for Apple in a patent dispute, declines in profit for Charles Schwab Corp., and changes at Bayer AG with significant job cuts.
  7. Technology Sector Dynamics:

    • Samsung Electronics Co.'s use of artificial intelligence features to revamp its flagship Galaxy smartphones is highlighted, emphasizing the competition with Apple's iPhone.
  8. Cryptocurrencies and Commodities:

    • Market movements of Bitcoin and Ether are noted, along with changes in the yields of 10-year Treasuries and other government bonds. Additionally, there's a mention of changes in the prices of West Texas Intermediate crude and spot gold.
  9. Upcoming Economic Events:

    • The article lists key events scheduled for the week, including US housing starts, initial jobless claims, a Republican presidential primary debate in New Hampshire, and various speeches by central bank officials.
  10. Market Performance Snapshot:

    • The article concludes with a snapshot of the day's market performance, indicating percentage changes in major stock indices, currency movements, cryptocurrency values, bond yields, and commodity prices.

This comprehensive overview showcases the interplay of economic data, central bank policies, and corporate developments, providing readers with insights into the complex and dynamic world of financial markets.

Stocks Drop as Solid Data Fuel Fed-Pivot Repricing: Markets Wrap (2024)
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