- This month, the 10-year US Treasury yield reached its highest level in response to the BoJ policy tweak.
- Investors are baffled about how to interpret the BoJ’s policy shift.
- Single-family homebuilding in the United States fell to a 2-1/2 year low in November.
Equities held steady on Wednesday after closing higher on Tuesday. The dollar lost strength, and bond yields rose due to the Bank of Japan’s unexpected policy change.
The surge in the yen caused the dollar to fall, and the 10-year US Treasury yield reached its highest level this month. This was in response to the Japanese central bank’s unexpected policy adjustment to permit long-term interest rates to rise. All three major US market indices recovered after earlier losses.
According to Matthew Keator, managing partner of the Keator Group, Japan has been consistently steady for many years. Investors are baffled about how to interpret even the slightest change in their policies going forward.
The S&P 500, the Dow, and the Nasdaq are all expected to have their largest annual percentage declines since 2008, the worst year of the global financial crisis. This is primarily because of ongoing inflation and the Fed’s increasingly aggressive fight against it.
Since the Federal Reserve’s policy meeting last week, concerns about its intention to keep rising US interest rates have significantly impacted the stock market.
Investors were also concerned about the upcoming quarter’s earnings period and the upcoming Christmas shopping season.
Data released Tuesday revealed that single-family homebuilding in the United States fell to a two-and-a-half-year low in November. As higher mortgage rates continued to dampen the housing market’s activity, future building permits fell.
The dismal data from the Commerce Department on Tuesday came soon after the announcement on Monday that homebuilders’ confidence had dropped for a record-breaking 12th consecutive month in December.
It put residential investment on course to decline for the seventh straight quarter, which would be the longest stretch since the Great Recession’s start when the housing bubble burst. As the Federal Reserve fights inflation, the housing market has taken the burden of the Fed’s quickest cycle of rate increases since the 1980s.
By reducing demand for everything from housing to labor, the Fed hopes to limit inflation. Although the labor market has remained tight, experts predict it will begin to relax and weaken next year, mainly due to the weaker housing market.