Stocks rise, 2-year US bond yield eases after soft US inflation data

Stock prices on Wall Street and the yield of 2-year US Treasury bonds rose on Wednesday, leading to lower yields as concerns about the Federal Reserve's interest rate hikes next month decreased following softer-than-anticipated inflation data. While long-term yields remained elevated, reflecting the challenges faced by global bonds after their worst month in years, fixed-income investors had to contend with issues such as deteriorating government finances, excessive debt issuance, and rising energy costs.

The 10-year US yield was poised for its largest monthly increase since 2022. Oil prices surged, setting the commodity on track for significant monthly gains. Expectations that the Federal Reserve would maintain steady rates next month rose from 55 per cent to 65 per cent, according to the latest data from LSEG. The US Personal Consumption Expenditures Price Index remained flat on a monthly basis, increasing by 0.3 per cent year-on-year, which was more moderate than initially reported.

Despite a volatile month, the benchmark S&P 500 was expected to post a gain for September and the quarter, while the MSCI index of global stocks slipped 0.8 per cent. The US dollar weakened following the inflation data, with the euro rising 0.16 per cent to $1.1358 and the Japanese yen weakening 0.08 per cent to 157.15.