# Stocks, dollar gain on soft landing hopes
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-27
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Stock Markets Rally as U.S. Economy Shows Resilience
Meta Description: Get the latest on global stock market rally and dollar strength on Thursday as US economy shows signs of strength with slowing inflation.
URL: https://financedigest.com/stocks-dollar-gain-on-soft-landing-hopeshtml

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By Herbert Lash

NEW YORK (Reuters) -Global stock markets rallied and the dollar strengthened on Thursday after a slew of data showed a strong U.S. economy that is decelerating with [slowing inflation](https://www.financedigest.com/spains-12-month-inflation-slows-down-again-in-december-to-5-8.html "Spain’s 12-month inflation slows down again in December to 5.8%"), giving credence to the Federal Reserve’s desire to engineer a soft landing.

Gross domestic product [increased at a faster-than-expected 2.9% annual rate in the fourth quarter of last year as consumers boosted spending](https://www.financedigest.com/should-we-be-more-cautious-about-contactless-1-in-4-young-adults-with-contactless-cards-say-theyve-increased-their-spending.html "Should we be more cautious about contactless? 1 in 4 young adults with contactless cards say they’ve increased their spending") on goods, the U.S. Commerce Department said.

[Inflation data](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") improved too, as personal consumption expenditures growth slowed to 2.1% year over year from 2.3% in the prior quarter while the GDP price index decelerated to 3.5%.

But the [Fed’s hefty interest rate hikes](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") last year eroded demand and slowed growth toward the end of 2022, posing tough choices for U.S. central bank policymakers as they contemplate how much [higher rates](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") need to go when they meet next week.

MSCI’s all-country world index, a gauge of stocks in 47 countries, rose 0.90% to [hit a fresh](https://www.financedigest.com/londons-ftse-100-hits-fresh-record-high-as-telecoms-surge.html "London’s FTSE 100 hits fresh record high as telecoms surge") five-month high, while the dollar index rose 0.246%.

The market is pricing in a Fed pivot where they actually cut rates by the end of the year,” said James Ragan, director of [wealth management](https://www.financedigest.com/wealth-management-consultant.html "Wealth management consultant") research at DA Davidson in Seattle, adding Fed Chair Jerome Powell is unlikely to indicate any move next week.

What Powell has [pushed back on a lot is to not really think about lowering rates](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") at all,” Ragan said. But they are willing to pause and [hold rates](https://www.financedigest.com/sterling-holds-firm-after-uk-jobs-data-muddies-rate-outlook.html "Sterling holds firm after UK jobs data muddies rate outlook") at a high level for a certain period of time.

Futures are pricing a 94.7% probability of a 25 basis points hike next Wednesday and see the Fed’s overnight rate at 4.45% by next December, or lower than the 5.1% rate Fed [officials have projected into next year](https://www.financedigest.com/hong-kong-finance-official-to-make-first-visit-to-britain-in-three-years.html "Hong Kong finance official to make first visit to Britain in three years") on market expectations of a rate cut.

Treasury yields rose as the resilient economy strengthened the case for the Fed to maintain its hawkish stance in coming months as it seeks to [cool inflation](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected").

The yield on 10-year [Treasury](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") notes was up 3.6 basis points to 3.498% and the gap between yields on three-month Treasury bills and 10-year notes, seen as a recession harbinger, narrowed to -117.9 basis points.

On balance, the [data being better than expected suggests there’s more resilience in the economy](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") than many have given it credit,” said Joe Manimbo, senior market analyst at Convera in Washington. The fact that [inflation figures in the Q4 data](https://www.financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-data.html "Dollar trims gains vs euro after U.S. inflation data") moderated suggests it’s a Goldilocks scenario.

The Dow Jones Industrial Average rose 0.61%, the S&P 500 gained 1.10% and the Nasdaq Composite added 1.76%. In Europe, the broad STOXX 600 index closed up 0.42%.

While talk of recession likely is overdone, the market is not cheap, said David Bahnsen, chief investment officer at private [wealth manager](https://www.financedigest.com/analysis-credit-suisse-collapse-threatens-switzerlands-wealth-management-crown.html "Analysis-Credit Suisse collapse threatens Switzerland’s wealth management crown") The Bahnsen Group in Newport Beach, California.

[“Investors should not assume that the easy times in the market are coming back,”](https://www.financedigest.com/glencore-courts-120-teck-investors-for-bid-backing-as-spinoff-vote-looms-source.html "Glencore courts 120 Teck investors for bid backing as spinoff vote looms -source") he said. I don’t [think people](https://www.financedigest.com/55-of-people-who-regularly-play-sport-dont-think-being-verbally-abusive-to-another-player-makes-them-a-bad-sport.html "55% OF PEOPLE WHO REGULARLY PLAY SPORT DON’T THINK BEING VERBALLY ABUSIVE TO ANOTHER PLAYER MAKES THEM A BAD SPORT") should be in a hurry to go back to excessive risk.

Overnight in Asia, equities rose to a seven-month high, with [Hong Kong](https://www.financedigest.com/citadel-accelerates-hiring-push-in-hong-kong-and-london.html "Citadel accelerates hiring push in Hong Kong and London") shares playing catchup to other markets’ gains as trade resumed after a three-day Lunar New Year holiday.

MSCI’s broadest index of Asia-Pacific [shares outside Japan climbed 1.1% and was set for its fifth straight day of gains](https://www.financedigest.com/european-shares-set-for-weekly-gain-on-u-s-inflation-outlook.html "European shares set for weekly gain on U.S. inflation outlook").

Oil [prices rose more than 1% on Thursday on expectations demand will strengthen as top](https://www.financedigest.com/4-for-the-price-of-1-what-you-can-buy-in-the-uks-top-northern-cities-for-the-price-of-a-london-pad.html "4 for the price of 1: What you can buy in the UK’s top northern cities for the price of a London pad") oil importer China reopens its economy and on positive U.S. [economic data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades").

U.S. crude futures settled up 86 cents at $81.01 a barrel, and Brent rose $1.35 to settle at $87.47.

Gold edged down after the strong U.S. data. Indications of a likely slowdown limited losses in the safe-haven asset.

U.S. gold futures settled down 0.7% at $1,930.

[(Reporting by Herbert Lash, additional reporting by Huw Jones in London](https://www.financedigest.com/london-reclaims-place-as-preeminent-global-financial-centre-for-the-first-time-since-2013-according-to-global-regulatory-outlook-report-from-duff-phelps.html "London reclaims place as preeminent global financial centre for the first time since 2013, according to Global Regulatory Outlook report from Duff & Phelps"), Ankur Banerjee; editing by Nick Macfie, Elaine Hardcastle, Sharon Singleton and Jonathan Oatis)


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