U.S. stock rout eases as traders assess policy outlook
BNN Bloomberg
A semblance of calm returned to markets on Wednesday after the carnage sparked by hotter-than-expected American inflation that prompted investors to reassess the outlook for interest rates and economic growth.
US equity-index futures rallied after shares had their biggest drop in more than two years Tuesday, with the S&P 500 falling more than 4 per cent and the Nasdaq 100 sliding more than 5 per cent. A gauge of the dollar retreated after jumping the most in three months on Tuesday. The 10-year Treasury yield ticked higher, hovering near a decade-peak.
While the magnitude of Tuesday’s equities rout was impressive, the S&P 500 only reversed gains made in the previous four sessions that had been fueled by expectations of cooling inflation that would give the Federal Reserve room to temper its tightening path. The lack of a surge in the VIX index -- known as the “fear gauge” -- suggests that the selloff was a recalibration of those expectations rather than panic selling.
Swaps traders are now pricing in a hike of three-quarters of a percentage point next week, with some wagers appearing for a full-point move.
