S&P 500: Resilient as Fed tone turns dovish – Deutsche Bank

Deutsche Bank’s Early Morning Reid team reports that the S&P 500 broke a three-day losing streak, helped by a pullback in US Treasury yields and more dovish FOMC commentary. Despite strong US data and earlier upward pressure on yields, markets now price a much lower probability of an October Fed hike, supporting US equities into the upcoming jobs report.

Equities supported by lower hike odds

"Whilst European assets struggled yesterday, there was a very different tone in the US."

"Moreover, US equities recovered from their earlier sell-off, with the S&P 500 (+0.19%) ending a run of three consecutive declines, whilst futures for the index are up another +0.27% this morning."

"That left an October Fed hike just 30% priced by yesterday’s close, down from 37% on Wednesday and 70% on Monday before NY Fed President Williams similarly signalled no urgency for the next hike."