Investors reverse rate hike bets as Fed signals caution. Consumer sentiment declines, inflation expectations rise. Crucial data ahead for Federal Reserve's policy calculations. Diageo lowers growth projections.
Troy D. Hanson
November 10, 2023
Traders Reverse Bets on Rate Increases as Fed Signals Cautious Approach
Rate-sensitive sectors saw a significant turnaround in trading today, as investors shifted their expectations regarding further interest rate hikes. Federal Reserve Chairman Jerome Powell's comments about being cautious of potential "head fake" from moderating inflation data led to a rally in consumer companies.
Dip in Consumer Sentiment
Consumer sentiment took a hit in November, marking the fourth consecutive month of decline. The sentiment index dropped to a six-month low of 60.4. Concerns over rising interest rates and geopolitical tensions in the Middle East were cited as the primary reasons behind the decline.
Rising Inflation Expectations
A worrisome trend emerged as consumers' inflation expectations increased substantially. Such a pattern could potentially lead to entrenched inflation, which may result in price hikes throughout the economy.
Key Data Ahead
Market experts are anticipating a crucial week ahead for the Federal Reserve's policy calculations. A series of inflation data, including consumer and producer-price data, will be released next week. This data is expected to provide a clearer perspective on the trajectory of inflation.
Quincy Krosby, Chief Global Strategist at brokerage LPL Financial, highlighted the significance of this upcoming data, stating, "We'll have a perhaps clearer sense of the path of inflation."
Diageo Faces Growth Projections Cut
In other news, Diageo, the renowned distiller, announced a reduction in its growth projections for both the short and medium term. This development led to a fall in Diageo shares.