Bonds & Stocks
Stocks rose, with the S&P 500 set to extend its rally for a second day, as companies including Jeep maker Stellantis NV and social media company Pinterest Inc. reported better-than-expected earnings. S&P 500 futures added 0.2% and Europe’s Stoxx 600 climbed 0.6%. Bonds climbed, with the yield on the 10-year note falling 8 basis points, after the US Treasury reduced its estimate for federal borrowing for the current quarter, citing stronger-than-expected revenue.
Economy
Treasury yields look poised for a fresh burst higher in the coming months, even if the Federal Reserve ends up calling a halt to interest-rate hikes over its final two meetings of 2023. Wednesday’s policy decision offers bonds a chance to build on the momentum that began last week when bulls piled back in after 10-year yields once again drew back from 5%. While I have sympathy with the view that high yields will attract fresh buyers, as Tatiana Darie has argued, the prospect of rising supply is likely to overwhelm any such demand.
World
Israel’s military engaged in fierce battles with Hamas militants deep in the Gaza Strip and fired at targets in Lebanon in retaliation for attacks by Hezbollah. The fighting came as Prime Minister Benjamin Netanyahu said a cease-fire would only allow Hamas to regroup. During a visit to Qatar, Iranian Foreign Minister Hossein Amirabdollahian called for the “last political opportunities” to be used to halt the war.