The Fed "Unwinding" Is Upon Us, Worrying Some Market Observers



U.S. Treasury prices were little changed Thursday, leaving the 2-year Treasury yield near an nearly nine-year high after the Federal Reserve on Wednesday indicated that it still plans to deliver another rate increase in 2017. "Clearly there is still a lot of convincing to do on the Fed's part, potentially providing in the process plenty of upside for USA yields and the dollar". Bond yields rose, leading to gains for banks but losses for high-dividend stocks like household goods makers and utilities.

Best Buy (BBY.N) fell 8 percent after the No. 1 US electronics retailer forecast fiscal 2021 adjusted earnings well below Wall Street estimates.

Western Digital slipped more than 4 percent after Japan's embattled Toshiba agreed to sell its semiconductor business to a group led by private equity firm Bain Capital.

Western Digital slipped about 6 percent after Japan's embattled Toshiba said it agreed to sell its semiconductor business to a group led by US private equity firm Bain Capital.

OIL: Benchmark U.S. crude rose 1.1 percent to $50 a barrel on the New York Mercantile Exchange while Brent crude, used to price global oils, advanced by the same rate to $55.77 per barrel in London. Income-seeking investors find those stocks less appealing when bond yields move higher. On the Nasdaq, 1,248 issues rose and 977 fell.

The Aussie was hurt after Reserve Bank of Australia Governor Philip Lowe said on Thursday that the central bank does not have to follow a general move globally to raise interest rates.

The kiwi jumped half a USA cent after the 1News Colmar Brunton poll yesterday showed the National Party leapfrogged its rival Labour Party, with 46 percent support to 37 percent.

Bond prices fell, sending yields higher. The previous quarter's growth rate was upwardly revised from 0.5% to 0.6%. The Standard & Poor's 500 index lost 0.3 percent to 2,500.60.

The Dow Jones Industrial Average (NYSEARCA:DIA) traded within a narrow range before closing at 22,412.59 for its seventh consecutive record close. The long-run fed funds rate is now expected to be 2.75 percent instead of 3.00 percent. The stock was the biggest percentage loser on the S&P technology index. Several packaged food companies also declined.

The euro was up 0.35 percent at $1.1933. The Fed, though, has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate.

Crude oil prices were little changed amid a wait-and-see mood as ministers from the Organisation of the Petroleum Exporting Countries, Russia and other producers meet later on Friday to discuss a possible extension of the 1.8 million barrels per day (bpd) of supply cuts to support prices. The euro climbed 0.4% to $1.1997, the strongest in more than a week.

Stocks were set to open flat at 0700 GMT, with the JSE securities exchange's Top-40 futures index barely changed.

Tokyo finished the morning session 0.3 percent lower.

In another day of heavy volumes with over 32m ounces changing hands on the Comex market in NY spot gold dipped to $1,297.40 an ounce, a three-week low.

Latest News