Dallas Fed's Logan backs two hikes then a pause; December 50bp odds rise to 12%
What happened
Federal Reserve Bank of Dallas President Lorie Logan raised the prospect on Tuesday, November 10 of hiking interest rates more quickly this winter, saying there is a case for two 25-basis-point increases, after which it would 'make sense' to pause. She also said Fed policy should be 'modestly' restrictive. Her comments followed Fed Governor Christopher Waller's London speech earlier Tuesday backing a December hike and flagging a possible 50bp move if inflation stayed hot — and the October CPI report, released hours later, printed hotter than expected at +0.4% headline and +0.3% core. The CME FedWatch Tool now shows an 88% likelihood of a 25bp increase and a 12% likelihood of a 50bp raise at the December FOMC meeting, with the odds of a 50bp move rising to 52% for January. The current Fed funds target rate sits at 3.75%-4%.
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- Broad market (SPY/DIA/QQQ): stocks fell Tuesday — S&P 500 down 0.6%, Nasdaq down 1.1%, Dow down 0.4% — as hike odds hardened
- Treasuries: the 10-year yield surged 13bp to 4.99%, near the 5% level; the 2-year jumped 19bp to 4.75%, its biggest one-day rise in two years
- Rate-sensitive equities (homebuilders, small caps, REITs): the homebuilders ETF (XHB) fell more than 2% as higher-for-longer repricing hit
- Growth/tech: technology was the weakest S&P sector Tuesday as higher yields pressured valuations