The S&P 500 index traded sharply higher on Friday as investors once again started to expect a not-so-hawkish Fed, helping boost market sentiment.
US surveys printed strong
The final US Services PMI from S&P Global was 50.6, an increase from the flash reading of 50.5 and a significant comeback from January’s reading of 46.8.
You can also read: Inflation rages on, yields pop to cycle highs
Despite a significant recovery in January (after a sharp drop in December), the ISM Services PMI fell very little from 55.2 to 55.2 (better than the expected 54.5). After seven months of contraction, S&P Global’s poll demonstrates a return to expansion, although a little.
“Business activity in the US service sector returned to growth in February for the first time in eight months, offsetting a decrease in industrial production to help stabilize the economy and possibly escape a first-quarter recession,” Chief Business Economist at S&P Global Market Intelligence, Chris Williamson stated:
Finally, in February, the S&P Global US Composite PMI Output Index increased from January’s reading of 46.8 to 50.1.
Not all of the FOMC members are hawkish
Sentiment in the markets improved recently as Atlanta Federal Reserve President Raphael Bostic stated that he is still open to hiking rates by another quarter point at the March meeting of the central bank. In a news briefing, Bostic told reporters, “I let the data guide me. If indicators continue to indicate that the economy is stronger than anticipated, I will modify my policy course.”
Bostic, who is not a voter on monetary policy this year, published an essay on Wednesday urging the Federal Reserve to increase its policy rate by 50 basis points to a range of 5% to 5.25% and then maintain that rate until well into 2024.
In February, Fed policymakers lifted the benchmark rate by a quarter percentage point, bringing the target range from 4.5% to 4.75%. After the central bank’s March 21-22 meeting, policymakers will provide updated forecasts.
The probability of a more significant 50 basis point rate rise in March was only 20%. Still, investors expect monthly payrolls and consumer prices data to determine if the Fed will act aggressively later this month.
Earlier in the week, China’s Caixin Services PMI tracked the most recent activity data for the dragon nation and printed 55.00 for February, compared to market predictions of 50.0 and prior readings of 52.9.
Technically speaking, the index has defended the 200-day moving average (the blue line), confirming the bullish momentum. Therefore, the next target could be near previous highs at $4,105.
S&P 500 daily chart, source: author´s analysis, tradingview.com
Post has no comment yet.