By Sinéad Carew and Iain Withers
NEW YORK/LONDON (Reuters) – MSCI’s global equities index edged higher on Friday, after registering a record close in the prior session, while U.S. Treasury yields rebounded after sliding the day before when expectations climbed for U.S. rate cuts.
The University of Michigan’s Surveys of Consumers showed that U.S. consumer sentiment fell for a second straight month in September to its lowest point since May, as consumers saw rising risks to business conditions, the labor market and inflation.
Consumer inflation expectations for the next year stayed at 4.8% but inflation expectations for the next five years rose to 3.9% from last month’s 3.5%.
“The University of Michigan sentiment study came in worse than expected and more importantly inflation expectations remained pretty high. That’s sending yields a little higher,” said Jack Ablin, founding partner and chief investment strategist at Cresset Capital.
“Investors worry that expectations dictate reality and perhaps consumers will act accordingly if they expect inflation to be higher than usual … and just perpetuate the inflation hamster wheel.”
Wall Street was a mixed bag after all three of its main indexes registered record closing highs on Thursday, when investors reacted bullishly to weaker-than-expected jobs data by ramping up bets that the Federal Reserve would make three rate cuts in a row, including a cut on September 17 after its next meeting.
“The market feels a little stretched and toppy. And now investors in the market are going to focus on next Wednesday and exactly what Jay Powell says, how he says it. Does he sound more dovish? What lines did he delete? What lines did he add?,” said Kenny Polcari, partner and chief market strategist at SlateStone Wealth in Jupiter, Florida, referring to Fed Chair Jerome Powell’s press conference and the Fed’s written statement.
“Rates are going lower for sure but I do think the market has gotten ahead of itself in terms of valuation.”
Thursday’s U.S. consumer price report had been seen as the last major…
..
