Raphael Bostic, president and chief executive officer of the Federal Reserve Bank of Atlanta, speaks at the Buckhead Club in Atlanta, Georgia, U.S., on Wednesday, Feb. 19, 2020.
Elijah Nouvelage | Bloomberg | Getty Images
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Markets overcame fears of higher rates to stage a last-minute rally.
What you need to know today
U.S. Treasury yields climbed to new heights. The yield on the 10-year Treasury breached 4% and settled at 4.062%. The 2-year yield was 4.889%, a rate not seen in more than a decade.
Stocks in the U.S. rose on Thursday, with all major indexes closing in the green. Likewise, European markets traded higher, despite headline inflation in the euro zone rising more than anticipated — more on that below.
Headline inflation in the EU slowed to 8.5% in February, but that’s more than the 8.2% economists had expected. It’s likely the European Central Bank will continue raising interest rates aggressively.
At its investor day on Wednesday, Tesla announced plans to reduce its use of silicon carbide transistors and rare earth metals in its new vehicles. Shares of semiconductor firms dropped, with Wolfspeed down 6.98% on the news, while raw material supplier MP Materials sank 10.97%.
PRO Investors weren’t impressed by Tesla’s investor day, causing its shares to drop 5.85% on Thursday. Major analysts were more divided on the company — some believe the event “should increase investor confidence in Tesla.”
The bottom line
Markets digested mixed messages on Thursday and eventually overcame fears of higher rates to stage a last-minute rally.
Early in the day, the U.S. Labor Department reported labor costs jumped 3.2% in the fourth quarter, two times what analysts had estimated. Meanwhile, weekly jobless claims fell by 2,000 to 190,000, which was below the expectation of 195,000. The data suggested an employment market that, somewhat astoundingly, is still robust, which might prompt the Federal Reserve to increase rates when it meets later this month. Markets opened lower on the news.
Yet markets’ fears were allayed mere hours later when Atlanta Federal Reserve President Raphael Bostic told the media he’s in favor of lower — and slower — rate hikes. “Right now I’m still in very firmly in the quarter-point move pacing,” Bostic said, adding that “slow and steady” is his preferred course of action. His comments came after other Fed officials had expressed a distinctly more hawkish tone in recent days, and what he said helped to turn around market sentiment on Thursday.
The S&P 500 added 0.76%, the Nasdaq Composite rose 0.73% and the Dow popped 1.05%, helped by a 11.5% jump in Salesforce. Despite the gain, the S&P 500, in particular, appears to be on unsteady ground, writes CNBC’s Patti Domm. The index has been hovering around its 200-day moving average, which is viewed as an indicator of the health of a stock or index. If the S&P drops below that level, fears in the market could trigger more selling. For now, however, all major indexes are on track for a winning week.