Good Day to You, Stock Investors!

Stock investors digesting better-than-expected profits numbers and a rise in consumer confidence kept US equity gains intact. As much of the market volatility over the Bank of Japan’s unexpected rise in its yield trading band faded, bonds steadied after yesterday’s selloff.

With over 90% of its stocks increasing, the S&P 500 increased by 1.8%. The tech-heavy Nasdaq 100 increased by over 1%. The news that Nike Inc. had exceeded Wall Street expectations provided a much-needed boost to US equities after the Federal Reserve’s hawkish shift last week.

According to fresh US data released on Wednesday, the Fed’s persistent rate hikes are serving their purpose. However, a recession may still be at bay. New home sales in the United States fell for a tenth month in November. However, consumers’ optimism increased more than expected as inflation slowed and gasoline prices fell.

Fundamentals Are Improving… and At a Cheaper Price

“Investors are excited by the prospects of buying improving fundamentals at a cheaper price, following the past week’s selloff on Fed concerns,” said Mike Bailey, a principal of FBB Capital Partners. “In terms of macro data, improving consumer confidence also adds to the favorable move in investor sentiment. However, I think inflation, the job market, and earnings are top of mind for most investors at the moment.”

The 10-year Treasury yield stabilized at 3.68% following a 3.70% drop on Tuesday. After posting its largest daily gain since 1998 on Tuesday, the yen fell against the dollar. After two days of declines, the dollar climbed against a basket of currencies.

Dust is starting to settle on Japan’s decision to boost the upper limit of its 10-year bond yield. The move has convinced stock investors that the BoJ will join its peers next year in raising interest rates. From an $18.4T peak reached two years ago, rising yields have already reduced the world’s stock of negative-yielding debt to about $686B.