The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
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Wall Street's main indexes fell on Wednesday, as rising US Treasury yields and losses in McDonald's and Coca-Cola impacted investor sentiment. The 10-year Treasury yield climbed to a three-month high, raising concerns over the potential size of future Federal Reserve interest-rate cuts, as strong economic data suggests a less dovish stance from the central bank.
"When you get a 10-year Treasury yield at 4.25%, it pressures the stock market, slowing down the rally and causing some nervousness," said Robert Pavlik, senior portfolio manager at Dakota Wealth.
Rate-sensitive growth stocks were among the hardest hit, with Nvidia down 1.8% and Apple slipping 0.5%. The tech-heavy Nasdaq saw a 0.47% decline, while the S&P 500 and Dow Jones also fell by 0.34% and 0.57%, respectively.
McDonald's slumped 6.1% following an E. coli outbreak linked to its Quarter Pounder hamburgers, which resulted in one death and multiple illnesses, dragging down the Consumer Discretionary sector by 0.7%. Coca-Cola also dipped 2.7% despite reiterating its annual profit growth forecast, contributing to the market's downturn.
On the positive side, Texas Instruments rose 4% after beating profit forecasts, and AT&T gained 1% on stronger-than-expected subscriber growth. However, Qualcomm dropped 2.7% following reports that Arm Holdings may cancel its license to use chip-design intellectual property.
Investors are keeping a close watch on the Fed’s Beige Book and remarks from Fed official Thomas Barkin for further insights into the central bank’s outlook. Additionally, market volatility may increase due to the upcoming US presidential election, with concerns that a second Donald Trump administration could boost spending, widen the fiscal deficit, and drive inflation higher.
Despite the day's declines, the overall earnings season has been strong, with 83% of S&P 500 companies reporting earnings that exceeded estimates, according to LSEG data. However, the combination of a changing monetary policy outlook and political uncertainty could challenge the market's recent highs.
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