All three major U.S. indices rose on Friday even as they headed for a weekly loss, after an accelerating inflation reading pushed traders to raise their bets on a Federal Reserve rate hike next week. Oil pulled back from a four-month high, while Treasury yields stayed elevated near a near-three-year peak.
The Dow Jones Industrial Average rose 1.13%, the S&P 500 gained 1.03% and the Nasdaq Composite added 1.15% on Friday, even though all three remained on track for a weekly loss. MSCI's gauge of stocks across the globe climbed 5.66 points, or 0.50%.
Inflation data lifts Fed hike bets
The Consumer Price Index increased 0.4% last month after edging up 0.1% in July, the Bureau of Labor Statistics said. Traders responded by adding to bets on a hike from the Fed at its two-day meeting next week: markets now see about an 85% chance of a quarter-point hike, up from around 67% before the data. The Fed releases its policy statement Wednesday, followed by a press conference with Chairman Kevin Warsh.
According to Reuters: "Thus far, the Fed has simply stared at inflation with its withering gaze," said Shawn Snyder, economic strategist at Potomac Fund Management, adding that with oil hovering around $100 a barrel it is hard to see the outlook improving soon.
Oil retreats after a four-month high
Brent crude hit a four-month high of $109.97 a barrel on Friday after a 6% jump the day before, before easing back about 2.9% to $104.49. It was still set for a weekly rise of over 8%. Oil flows through the Strait of Hormuz remained restricted as the United States and Iran traded attacks, though prices eased after the Financial Times reported Middle East foreign ministers were working on a temporary deal to manage shipping through the waterway. President Donald Trump's comments that the war could last beyond the November midterm elections have not helped, with bond yields surging globally on heightened inflation fears.
Yields, dollar and gold hold steady
The benchmark 10-year Treasury yield was slightly higher at 4.96%, helped by retreating oil prices, after briefly touching 4.9915% — its highest in almost three years — right after the inflation data. The dollar was flat on Friday at 99.1, having gained 0.4% against major peers the day before. Gold rose 0.8% to $4,350 an ounce after dropping nearly 2% on Thursday.
Source: Reuters via Investing.com
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