Matteo Colombo
A choppy trading session left the major U.S. equity averages in negative territory during mid-afternoon trading on Friday. The slide added to weakness seen the previous day, as investors remain concerned about aggressive Federal Reserve policy.
Trading took place amid PCE price data that rose more than forecasters expected. Meanwhile, comments from Fed officials continue to point to a hawkish stance from the central bank.
The Nasdaq Composite (COMP.IND) is near the flat line after showing strength for much of the session. The S&P 500 (SP500) is -0.4% and the Dow (DJI) is -0.7%.
In the latest hawkish commentary from a Fed official, Federal Reserve Vice Chair Lael Brainard signaled that the central bank was not planning to return to an accommodative stance in the near future.
“Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target, and tighter financial conditions to work their way through different sectors to bring inflation down,” she told a conference, according to prepared remarks.
Looking to economic news, the PCE price index data was stronger than anticipated, rising 0.3% month-over-month versus the expected increase of 0.2%.
Moreover, personal spending MoM data for August was 0.4%, higher than the forecasted 0.2%. Personal income MoM for August came in at 0.3%, in line with the consensus figure.
Elsewhere, Chicago PMI figures came in softer than the anticipated 51.8 forecast number. Chicago PMI for September was 45.7.
At the same time, September University of Michigan Consumer Sentiment data improved slightly from August. The figure reached 58.6 compared to the prior 58.2 recorded for August.
Turning to the bond market, Treasury yields are broadly flat following a recent string of gains. The U.S. 10 Year Treasury yield (US10Y) is up about two basis point to 3.76%. Meanwhile, the U.S. 2 Year Treasury yield (US2Y) is largely unchanged at 4.17%.
Looking overseas, the annual inflation rate in the Euro Area jumped to 10% in September of 2022 from 9.1% in August. The increase has touched a fresh record high in September, preliminary estimates have shown.
“The US Equity markets remain under pressure as we end Q3,” Citi outlined in an investor note. “Fed hawkishness is exceeding expectations from a quarter ago, as its determination to drive inflation back to the 2% target was reinforced at the latest Fed meeting.”
The firm added: “Gradually, rising rate headwinds on valuation are …….
