S&P 500 grows due to hopes of slowdown in pace of Fed rate hikes

Last Monday, significant increasing of S&P 500 was registered, which was connected to a possible prospect of the Fed slowing down its pace of interest rate hikes. Such hopes were driven by noted signs of economic growth getting slower.

A more optimistic outlook on the Fed’s monetary policy was sparked by two recent economic reports, which provided weaker figures than it was expected before. According to the obtained data, manufacturing activity has surprisingly declined, while activity in construction turned out to be worse than it was initially feared. The increased optimism suggests that the Federal Reserve System of the U.S. might consider changing its main policy direction to stop the economy from falling into severe recession.

There was also a notable decline in treasury yields due to investors’ expectations of the Fed choosing a less hawkish approach in its tightening of monetary policy.

The 10-year Treasury yield has decreased from a level which was a record high for more than a decade. The further falling is also possible. As it was stated by Janney Montgomery Scott, the continuing decline is likely to happen due to it remaining “very overbought on a short-term basis”.