By Chuck Mikolajczak
NEW YORK (Reuters) -Global stocks were higher and poised for a weekly gain while longer-dated U.S. Treasury yields rose after a reading on inflation and consumer confidence kept expectations for the path of Federal Reserve interest rate cuts intact.
The U.S. producer price index for final demand was unchanged in September, slightly below the forecast of economists polled by Reuters for a gain of 0.1% and follows an unrevised 0.2% increase in August, indicating inflation continues to cool and giving the Fed leeway to continue cutting interest rates.
In the 12 months through September, the PPI increased 1.8% versus the 1.6% estimate.
“The annual numbers are a little higher and it’s going to take a little time to go through why that is the case, (but) there’s nothing specifically in this number to make markets … change the narrative,” said Steve Sosnick, chief market strategist at Interactive Brokers.
The data comes after Thursday’s consumer price index was slightly higher than expected as good costs increased.
In a separate report, the University of Michigan’s preliminary reading on the overall index of consumer sentiment came in at 68.9 this month, compared with a final reading of 70.1 in September and below the 70.8 estimate as high prices frustrate buyers.
On Wall Street, U.S. stocks advanced in the early stages of trading, lifted by a jump of more than 4% in bank shares after several names such as JP Morgan, up 4.7% and Wells Fargo, which gained 5.3%, kicked off earnings season with their quarterly results.
The Dow Jones Industrial Average rose 293.26 points, or 0.69%, to 42,746.38; the S&P 500 rose 32.88 points, or 0.57%, to 5,812.71; and the Nasdaq Composite rose 57.21 points, or 0.31%, to 18,339.26.
Gains were capped, however, by a 7.5% drop in Tesla shares as the electric vehicle maker’s robotaxi event disappointed.
MSCI’s gauge of stocks across the globe rose 4.44 points, or 0.52%, to 852.63 and was on track for its fourth weekly gain in five weeks. In Europe, the STOXX 600 index rose 0.6%.
Expectations that the Fed will cut rates by 25 basis points at its November meeting stand at 82.5%, with markets pricing in a 17.5% chance of no change in rates, according to CME’s FedWatch Tool.
Markets had been fully pricing in a cut of at least 25 bps with a chance for another outsized 50 bps cut last week until a strong U.S. payrolls report prompted investors to dial back expectations.
Comments from Fed Chair Jerome Powell and other central bank officials have signaled a shift in focus from combating high inflation to labor market stability.
On Thursday, several policymakers said the data gives the Fed room to continue cutting rates, but Atlanta Federal Reserve Bank President Raphael Bostic told the Wall Street Journal he was open to skipping a rate cut.
Longer-dated U.S. yields were higher as investors continue to gauge the Fed’s rate path. The yield on benchmark U.S. 10-year notes edged up 0.4 basis point to 4.098% while the 2-year note yield, which typically moves in step with interest rate expectations, fell 3.7 bps to 3.962%.
The 10-year yield is up about 11 bps for the week and on pace for its fourth straight weekly advance. The 2-year yield is up more than 3 bps on the week, on track for a second straight weekly climb.
In currency markets, the dollar index, which measures the greenback against a basket of currencies, fell 0.06% to 102.83, with the euro up 0.1% at $1.0946. The greenback is up 0.4% on the week, on track for a second straight week gain after four straight weeks of declines.
Against the Japanese yen, the dollar strengthened 0.39% to 149.15. Sterling strengthened 0.14% to $1.3076 but remained near a one-month low after data showed Britain’s economy grew in August after two consecutive months of stagnation.
Crude prices slipped, but were set for a second straight weekly climb, as investors weighed the impact of hurricane damage on U.S. demand against any broad supply disruption if Israel attacks Iranian oil sites.
U.S. crude fell 0.59% to $75.40 a barrel and Brent fell to $78.93 per barrel, down 0.59% on the day.
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(Reporting by Chuck Mikolajczak, additional reporting by Lisa Mattackal and Pranav Kashyap in Bengaluru; editing by Jonathan Oatis)
