Stock Market Live: Stocks Edge Higher, Bonds Rally on Bank of Japan Surprise; Retail Sales Data In Focus

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A surprise hold on rates and policy moves from the Bank of Japan overnight has bond markets rallying, with stocks eyeing retail sales and earnings data.


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U.S. equity futures edged higher Wednesday, while the dollar drifted south and Treasury yields retreated, as investors reset prices in bond and currency markets following an unexpected policy move by the Bank of Japan and looked to a key reading on retail sales later in the session.

Bond markets rallied in major markets around the world overnight after the Bank of Japan declined to make any changes to its ultra-loose monetary policy, keeping rates near zero percent and maintaining the recently-altered trading bands in Japanese government bonds.

The decision, one of the final policy unveilings of Governor Haruhiko Kuroda, caught markets off-guard and triggered a wave of bond buying, with Japanese government bond yields falling the most in two decades and the yen sliding to a multi-week low against the dollar.

“The market was leaning for further policy tightening from the Bank of Japan after December’s surprise widening of the yield-curve-control ‘band’, but the Bank of Japan failed to deliver, leading to the yen getting shocked back lower, in part on the unwinding of the largest spike in implied volatility for overnight options over the event in years,” wrote Saxo Bank strategists. 

“BoJ Governor Kuroda said that the sustainable inflation goal is not yet in sight, suggesting low odds that he will declare victory on bringing back inflation before his exit in April,” Saxo added.

Benchmark 10-year Treasury note yields slipped 2 basis points to 3.49% in overnight trading, while 2-year notes were pegged at 4.184% in the wake of the global rally. 

The U.S. dollar index, which tracks the greenback against a basket of its global peers, was marked 0.23% lower at 102.154 and trading near the lowest levels in seven months. 

The moves haven’t, as yet, provided a spark for U.S. equity futures, however, with investors looking to today’s reading of December retail sales and fourth quarter earnings from Procter & Gamble  (PG) – Get Free Report and Netflix  (NFLX) – Get Free Report later in the week.

Headline December retail sales are expected to fall 0.8% from the previous month, economists expect, with core retail sales — which strip out gasoline, food and auto components — declining 0.4% as consumers pare back on spending or drawing down on their pandemic-era savings.

The so-called control measure, which also strips out sales from building-materials retailers, gas stations, office supply stores, tobacco stores and mobile homes, is a more refined tally of December spending and will likely provide an indication as to whether the cash saved on cheaper gasoline will find its way into broader discretionary spending. 

Markets are also likely to focus on a trio of speakers from the Federal Reserve today, with Dallas Fed President Lorie Logan, Philadelphia Fed President Patrick Harker and Dallas Fed President Raphel Bostic all set to make public appearances ahead of the central bank’s January 31 policy meeting in Washington.

The CME Group’s FedWatch is indicating a 90.2% chance of a 25 basis point rate hike from the Fed on February 1, up from around 76.7% this time last week, with traders expecting the Fed Funds rate to peak at a range of between 4.75% and 5% in the early spring.

Heading into the start of the trading day on Wall Street, futures tied to the the S&P 500 are priced for a 7.5 point opening bell gain while those linked to the Dow Jones Industrial Average are set for a 30 point bump. The tech-focused Nasdaq is indicated to open around 25 points higher, helped in part by a pull back in Treasury bond yields.

In terms of individual stocks, United Airlines  (UAL) – Get Free Report shares rose 3.22% after the carrier posted stronger-than-expected fourth quarter earnings and forecast Street-beating profits for the coming year.

Moderna  (MRNA) – Get Free Report shares, meanwhile, surged 7.8% after the drugmaker unveiled positive data from a late stage trial of its developing respiratory syncytial virus treatment after the close of trading on Tuesday.

Albertsons  (ACI) – Get Free Report shares were also active, rising 1.4% after a court in Washington state approved the grocer’s plans to pay a $4 billion dividend ahead of its proposed $25 billion tie-up with Kroger  (KR) – Get Free Report.

In overseas markets, the the region-wide MSCI ex-Japan index gained 0.26% into the close of trading, while Tokyo’s Nikkei 225 surged 2.5%, to the highest close since December 19, as the yen retreated following the Bank of Japan’s surprise policy stance.

Europe’s Stoxx 600 was marked 0.42% higher in early Frankfurt dealing as the regional benchmark extended its recent run of gains to a sixth consecutive session, the longest winning streak since November of 2021.

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