Intel Invests in Stability AI amid Board Wrangles

Stability AI, an AI startup that has been facing human resource challenges and concerns about slow revenue growth amid huge expenses, remains an attractive investment prospect. Chip giant Intel is the latest to show strong interest in the startup best known for developing the Stable Diffusion image-generating software that creates realistic-looking images from a few words of prompts.

Intel – Stability AI Investment

Intel reportedly participated in a financing round that rose close to $50 million in the form of convertible notes.  According to the company’s spokesperson, the company has received interest from major venture capital and strategic investors.

The latest capital raise comes a year after the startup raised $101 million in a seed round that valued it at $1 billion, making it one of the most valuable startups. Since then, the company’s growth has slowed, and its valuation is believed to have dropped amid a seemingly endless string of headwinds.

The London-based startup has been spending millions of dollars a month on expenses believed to be more than $8 million. The expenses include computing, workers’ salaries, and research and development spending. On the other hand, CEO Emad Mostaque confirmed in July of last year that the startup’s projected annual revenue was more than $10 million. Still, that number is believed to have dropped significantly.

Stability AI is undergoing one of the most challenging periods, having already shed more than half a dozen senior employees.  The company’s general counsel and human resource chief tendered their resignation in October, less than two months after the company highlighted members of its leadership team. The departures complicate the company’s transformation from a flashy startup to an established artificial intelligence.

Stability AI Board Challenges

Disagreements on the board are the latest headwind threatening the startup’s future and sentiments in the burgeoning sector. Investment firm Coatue Management with $50 million worth of stakes has had issues with the current management. The investment firm has been pushing to add a co-CEO or president, a move that confirms its doubt about the current regime.

The bad blood between the investment firm and Stability AI became earlier in the year when general partner Sri Viswanath skipped the planned board meeting and opted to send the firm’s lawyer. Coatue exiting its position on the board in October affirmed the tensions and came after Intel made a strategic investment in the company.

Coatue is also believed to have exited the board because it holds a large stake in Advanced Micro Devices, a major Intel competitor. The board tensions were further confirmed with Lightspeed Venture Partners Gaurav Gupta leaving his role as a board observer amid differences in opinion with management. The direction Stability AI has been pursuing has also been a concern for the board members.

The board struggles do not come as a surprise as CEO Mostaque has often been a controversial leader, with most people who have worked with him questioning some of his statements. The executive has been questioned for presenting blue-sky conversations about partnerships and products before reaching an actual agreement

Co-founder Cyrus Hodes also sued Stability AI over what he claims is being tricked into selling shares for cheap shortly before the company clinched a billion-dollar valuation.

(Reuters) – China is considering resuming purchases of Boeing’s 737 Max aircraft when the U.S. and Chinese presidents meet this week, Bloomberg News reported, citing people familiar with the matter.

Terms of any potential agreement were still under discussion and could change or fall apart before the heads of state meet on Wednesday, the report said.

(Reporting by Gokul Pisharody in Bengaluru; Editing by Tom Hogue)

By Yuka Obayashi

TOKYO (Reuters) – Oil prices eased on Monday, reversing their rally on Friday, as renewed concerns over waning demand in the United States and China dented market sentiment.

Brent crude futures for January were down 35 cents, or 0.4%, at $81.08 a barrel at 0051 GMT, while the U.S. West Texas Intermediate (WTI) crude futures for December were at $76.82, down 35 cents, or 0.5%.

Both benchmarks gained nearly 2% last Friday as Iraq voiced support for oil cuts by OPEC+, but lost about 4% for the week, notching their third weekly losses for the first time since May.

“Investors are more focused on slow demand in the United States and China while worries over the potential supply disruptions from the Israel-Hamas conflict have somewhat receded,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.

The U.S. Energy Information Administration (EIA) said last week that crude oil production in the United States this year will rise by slightly less than previously expected while demand will fall.

Weak economic data last week from China, the world’s biggest crude oil importer, also increased fears of faltering demand. Additionally, refiners in China asked for less supply from Saudi Arabia, the world’s largest exporter, for December.

Still, Kikukawa said oil prices would be supported if WTI approaches $75 a barrel.

“If the market falls further, we will likely see support buying on expectations that Saudi Arabia and Russia would decide to continue their voluntary supply cuts after December,” Kikukawa said.

Top oil exporters Saudi Arabia and Russia confirmed last week that they would continue with their additional voluntary oil output cuts until the end of the year as concerns over demand and economic growth continue to drag on crude markets.

OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, will meet on Nov. 26.

On the supply side, U.S. energy firms cut the number of oil rigs operating for a second week in a row to their lowest since January 2022, energy services firm Baker Hughes said. The rig count points to future output.

(Reporting by Yuka Obayashi; Editing by Shri Navaratnam)

By Herbert Lash and Nell Mackenzie

NEW YORK/LONDON (Reuters) -The dollar eased and global equities rebounded on Friday as Wall Street rallied on doubts that interest rates will go higher even after Federal Reserve Chair Jerome Powell cautioned that tighter monetary policy might needed to tame inflation.

Powell’s remarks on Thursday that the fight to restore price stability “had a long way to go” at first roiled markets. But a softer labor market as seen in last week’s unemployment report and speculation that next week’s consumer prices index (CPI) will show slower inflation spurred bulls into action.

“Even with Powell’s commentary yesterday, for the most part that’s been shrugged off as sounding too hawkish. People are not really convinced that the Fed is going to be raising rates going forward,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“Too many people were far too over their skis on the short side, both of equities and bonds, and you’ve seen that reverse in a huge way in the course of the last week.”

Many investors embraced the notion that U.S. rates have peaked after the Fed kept its overnight lending rate steady last week, a move that bolstered speculation the tightening cycle was over and spurred a rally in risky assets until Thursday.

Thierry Wizman, global FX and interest rates strategist at Macquarie in New York, said with the decline in gasoline prices the CPI data could surprise to the downside.

“We could also see some downside surprises in the core components of rents, for example, air fares, new cars, etc,” Wizman said. “If we were to get a low CPI next week, yields can come down around that number and we may get some weakening in the dollar.”

Core CPI month-over-month is expected to have risen 0.3% in October, with a year-over-year increase of 4.1%, a Reuters poll showed. Both estimated gains are the same as in September.

MSCI’s gauge of global equity performance gained 0.54%, while stocks on Wall Street surged 1% or more. The Dow Jones Industrial Average rose 1.03%, the S&P 500 gained 1.43% and the Nasdaq Composite added 1.94%.

Earlier in Europe, the pan-regional STOXX 600 index closed down 1.0%.

U.S. Treasury yields rose sharply on Thursday after a very weak 30-year bond auction. The extra yield needed to get the issue sold was the largest in several years as was the amount dealers were forced to absorb, said Dec Mullarkey, managing director for investment strategy and asset allocation at SLC Management in Boston.

“The market continues to struggle with what is the right premium or clearing level to fund the large pipeline of government debt issuance,” he said.

“Investors are worried about the prospects of higher rates for longer and the price volatility that may invoke.”

The two-year Treasury yield, which reflects interest rate expectations, rose 2.8 basis points to 5.050%, while the benchmark 10-year yield slid 1.2 basis points at 4.618%.

Futures show about a 35% probability the Fed will cut its overnight lending rate by 25 basis points by next May, according to the CME’s FedWatch tool, but the market expects that rate to stay above 5% through June.

Asian stocks closed the day down as worries over China, the world’s second-biggest economy, resurfaced after data on Thursday showed Chinese consumer prices dipped again.

Tapas Strickland, head of market economics at NAB, said the data keeps the pressure on Beijing to continue with its incremental easing in monetary and fiscal policy.

In currency markets, the dollar index fell 0.10% to 105.8, with the euro up 0.15% to $1.0682.

The Japanese yen weakened as traders remained on watch for possible intervention to shore up the struggling currency. The yen weakened 0.14% at 151.55 per dollar.

The dollar touched one-week highs against the Australian and New Zealand dollars. [FRX/]

Oil prices gained almost 2% as some speculators kept taking profits on short positions, but remained on track for a third week of losses on signs of slowing demand.

U.S. crude rose $1.43 to settle at $77.17 a barrel, while Brent settled up $1.42 at $81.43 a barrel.

Gold fell more than 1%, heading for a second straight weekly decline, as safe-haven demand eased.

U.S. gold futures settled down 1.6% at $1,937.70 an ounce.

(Reporting by Nell Mackenzie in London; Editing by Dhara Ranasignhe, Tomasz Janowski and Richard Chang)

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – A still-jittery bond market is clouding the outlook for a rally in U.S. stocks, analysts tracking measures of market volatility said.

Stocks and bonds have been in a tight relationship over the last few months, with the S&P 500 index surging nearly 7% in the last 10 sessions while the benchmark 10-year Treasury yield has tumbled 37 basis points from a 16-year high.

At the same time, the Cboe Volatility Index,, which measures expectations for stock gyrations, has fallen to a seven-week low of 14.13.

While such a retreat in Wall Street’s “fear gauge” would normally be a green light for stocks, there’s a catch: it has not been reflected in the most closely watched measure of Treasury volatility expectations, the MOVE index, which remains near its recent high.

That could be a problem if Treasury yields – which move inversely to bond prices – resume a climb that has pressured stocks since the summer.

“Equity markets have been the tail that’s being wagged by the rate market dog,” said Alex Kosoglyadov, managing director of equity derivatives at Nomura.

The MOVE index is nearly eight times higher than its equity-focused counterpart. That compares to a three-decade average in which the MOVE has been just under five times the value of the VIX.

“Rates are ultimately the foundation of the house, and if the foundation is moving around dynamically, I don’t know how you can make the case that the VIX is going to 12,” Tallbacken Capital Advisors CEO Michael Purves said. A significant drop in Treasury market volatility would be great news for stock market bulls, Purves said. “That would be huge,” he said.

(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Paul Simao)

By Michael S. Derby

NEW YORK (Reuters) – Federal Reserve Bank of San Francisco President Mary Daly said on Friday she is not ready to say yet whether the central bank is done raising its interest rate target to get inflation back to 2%.

The Fed’s monetary policy “is in a very good place” and “the news on inflation has been fairly good,” Daly said in a CNBC interview. “We shouldn’t dismiss that,” she said, while adding “all of that said, it is far too early to declare victory” and declare the Fed need not raise rates again.

Daly’s comments to the television channel were her first since last week’s Federal Open Market Committee gathering. At the meeting officials maintained their short-term rate target for a second time at between 5.25% and 5.5%, while preserving the option to boost the cost of borrowing again if price pressures do not continue falling to the 2% inflation target.

Part of the reason why the Fed reckoned it could hold steady was a jump in bond yields that helped increase the drag on the economy. Financial market participants broadly believe the Fed is done hiking its short-term target and will begin to cut it some time next year, but Fed officials have pushed back against that view.

In an appearance Thursday, Fed Chair Jerome Powell said it wasn’t clear if the Fed had boosted rates to the right level to slow the economy, adding “if it becomes appropriate to tighten policy further, we will not hesitate to do so.”

In her television appearance, Daly echoed Powell’s comments. “You can be significantly restrictive, which I think we are, and you can still not be sure if you’re sufficiently restrictive” in the way one needs to be to bring price pressures back down, Daly said.

For now the Fed needs to watch the data and stand ready to act, she said.

“There’s a lot of demand for certainty that we would say we’re done or we’re definitely hiking, but the truth is, we don’t know,” Daly said.

Thoughtful monetary policy “means we stand in the ready position, ready to stop if the inflation data continue to perform well, and ready to raise again to get to sufficiently restrictive if we mean to pull the reins back on the economy even more,” she said.

Daly also said a tightening in financial conditions seen since the Fed’s September policy meeting is still weighing on the economy even with recent declines in Treasury bond yields, and she said it was having the desired and expected impact on the economy. If financial conditions continued to ease, Daly said that would merit Fed attention.

What’s more, Daly noted that recent churning in the bond market was unlikely to be driven by some sort of underlying problem.

“Bond yields move around for a variety of reasons, and there’s a lot of uncertainty out there,” Daly said. “I don’t think we should be surprised at that volatility: I would like to make a very big distinction between volatility that causes financial dislocation or something worrisome about market functioning – we’re not there – and volatility that’s a natural outcome of tremendous uncertainty,” she said.

(Reporting by Michael S. Derby; Editing by Andrea Ricci)

By Herbert Lash and Nell Mackenzie

NEW YORK/LONDON (Reuters) -Global equities slid and Treasury yields fell on Friday after Federal Reserve Chair Jerome Powell dashed expectations that U.S. interest rates have peaked, but stocks rose on Wall Street as eyes turned to next week’s inflation data.

Powell told an International Monetary Fund conference on Thursday the Fed would “not hesitate” to tighten monetary policy if needed and that the fight to restore price stability “had a long way to go.”

Powell’s remarks, along with a weak auction of $24 billion in 30-year Treasuries, pushed yields higher, cast a shadow on equities and helped lift the dollar on Thursday.

Many investors embraced the notion that U.S. rates have peaked after the Fed kept its overnight lending rate steady last week, a move that bolstered speculation the tightening cycle was over and spurred a short-lived rally in risky assets.

The market is waiting for next week’s consumer price index (CPI) and to a lesser extent retail sales for signs of decelerating inflation and slower consumer spending.

“We have the possibility of seeing a downside surprise” in CPI “mainly because for the headline (number) certainly gasoline prices have fallen a lot,” said Thierry Wizman, global FX and interest rates strategist at Macquarie in New York.

“We could also see some downside surprises in the core components of rents, for example, air fares, new cars, etc.”

Core CPI month-over-month is expected to have risen 0.3% in October, with a year-over-year increase of 4.1%, a Reuters poll showed. Both estimated gains are the same as in September.

“If we were to get a low CPI next week, yields can come down around that number and we may get some weakening in the dollar,” Wizman said.

MSCI’s gauge of global equity performance shed 0.02%, on track for a fourth session of losses, and the broad pan-European STOXX 600 index lost 1.04%.

But stocks on Wall Street rose. The Dow Jones Industrial Average rose 0.39%, the S&P 500 gained 0.62% and the Nasdaq Composite added 1%.

The two-year Treasury yield, which reflects interest rate expectations, fell 0.2 basis points to 5.020%, while the benchmark 10-year yield was down 3.2 basis points at 4.598%.

Some investors said Powell’s hawkish comments on Thursday might have been prompted by a recent softening of financial conditions after yields tumbled in recent weeks.

“The recent decline in U.S. yields has sparked questions about the necessity for the Fed to increase rates further, especially if market yields continue to adjust downward,” Bruno Schneller, managing director at INVICO Asset Management.

U.S. rate futures have priced in a roughly 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool, down from about 70% before Powell’s speech.

Traders would be keeping a close watch on interest rate volatility, said Schneller, noting major market fluctuations recently. “A primary cause for this volatility is the debate over whether the current Fed funds rate is overly high or insufficient.”

Asian stocks closed the day down as worries over China, the world’s second-biggest economy, resurfaced after data on Thursday showed Chinese consumer prices dipped again.

Tapas Strickland, head of market economics at NAB, said the data keeps the pressure on Beijing to continue with its incremental easing in monetary and fiscal policy.

In currency markets, the dollar index rose 0.019% to 105.91, with the euro up 0.04% to $1.067.

The Japanese yen weakened as traders remained on watch for possible intervention to shore up the struggling currency. The yen weakened 0.11% at 151.48 per dollar.

The dollar touched one-week highs against the Australian and New Zealand dollars. [FRX/]

Oil prices rose but were set to fall for a third week on signs of slowing demand and as market attention turns to a key meeting of OPEC and its allies this month, which will determine the cartel’s next move on production.

U.S. crude recently rose 1.7% to $77.03 per barrel and Brent was at $81.27, up 1.57% on the day.

Gold hit an over three-week low on Friday, headed for a second straight weekly decline.

Spot gold dropped 1.0% to $1,938.89 an ounce.

(Reporting by Nell Mackenzie in London; Editing by Dhara Ranasignhe, Tomasz Janowski and Richard Chang)

By Nell Mackenzie and Ankur Banerjee

LONDON/SINGAPORE (Reuters) – U.S. stocks looked set for a mixed to lower start on Friday, while the dollar was steady as hawkish comments from U.S. Federal Reserve Chair Jerome Powell dashed expectations of a peak in interest rates.

At 1210 GMT, S&P 500 futures were flat while Nasdaq futures dipped 0.2%.

Globally, mood music was sombre, with MSCI’s broadest index of world shares hovering near a one-week low of 659.86, down 0.4% and on track for a fourth session of losses and a weekly decline of about 0.5%.

European stocks spent the session in the red with the STOXX 600 down 1% by 1215 GMT. Germany’s DAX dropped 0.8% while France’s CAC 40 and Britain’s FTSE both tumbled over 1%.

Fed officials including Powell on Thursday expressed uncertainty about their battle against inflation and added that they would tighten policy further if need be.

Powell’s comments along with a weak auction of $24 billion in 30-year Treasuries pushed yields higher, casting a shadow on equities and providing support to the dollar. [US/]

“Weak demand for long US paper makes investors wonder if spiralling deficits could erode the effectiveness of monetary policy,” Kenneth Broux at Societe Generale said in a note, adding this would be a main investor theme for 2024 as the United States prepares for presidential elections.

Investors had looked for signs of a U.S. interest rate peak after the Fed held rates steady last week, a move that bolstered speculation that the tightening cycle was over, spurring a short-lived rally in risky assets.

Some investors said Powell’s hawkish leaning on Thursday may have been the result of a recent softening of financial conditions after yields have tumbled in recent weeks.

“The recent decline in U.S. yields has sparked questions about the necessity for the Fed to increase rates further, especially if market yields continue to adjust downward,” Bruno Schneller, managing director at INVICO Asset Management.

The three major U.S. stock indices closed lower on Thursday, snapping the longest winning streaks for the Nasdaq and S&P 500 in two years as market bets on looser monetary policy faded. [.N]

U.S. rate futures have priced in about 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool, compared to odds of about 70% before Powell’s speech.

Traders would be keeping a close watch on interest rate volatility, said INVICO’s Schneller, who noted that recently the markets had seen significant fluctuations.

“A primary cause for this volatility is the debate over whether the current Fed funds rate is overly high or insufficient,” he said.

Asian stocks closed the day down as worries over the world’s second-biggest economy resurfaced after data on Thursday showed Chinese consumer prices dipped again.

Tapas Strickland, head of market economics at NAB, said the data keeps the pressure on Beijing to continue with its incremental easing in monetary and fiscal policy.

The yield on 10-year Treasuries stood at 4.6142%, having gained 12 basis points on Thursday, their largest one-day gain in three weeks.

In currency markets, the dollar index tipped down 0.07% from its overnight gains and was last at 105.85. The dollar stood near a one-year high at 151.43 yen and touched one-week highs against the Australian and New Zealand dollars. [FRX/]

Brent rose 95 cents to $80.96 a barrel while U.S. crude rose 90 cents to $76.64 a barrel, both up close to 1% on the day. The oil market has been reeling this week on demand concerns, with a fading war risk premium triggering a sell-off. [O/R]

Spot gold dipped about 0.5% to $1,947.60 per ounce and was on track for its worst week in more than a month, down 1.8%, as elevated yield and stronger dollar weighed.

In cryptocurrencies, bitcoin and ether held near multi-month highs, with renewed speculation over the imminent approval of an exchange-traded bitcoin fund breathing new life into the digital assets.

(Reporting by Nell Mackenzie in London; Editing by Dhara Ranasignhe and Tomasz Janowski)

By Nell Mackenzie and Ankur Banerjee

LONDON/SINGAPORE (Reuters) -World stocks slipped, with European shares retreating from three-week highs on Friday, while the dollar was steady as hawkish comments from U.S. Federal Reserve Chair Jerome Powell dashed expectations of a peak in interest rates.

The pan-European STOXX 600 fell 0.8% by 0930 GMT. Germany’s DAX dropped 0.7% while France’s CAC 40 and Britain’s FTSE both tumbled 0.9% lower.

The sombre mood was global, as MSCI’s broadest index of world shares fell 0.4% to a one-week low of 659.86, on track for a fourth session of losses and a weekly decline of about 0.5%.

Fed officials including Powell on Thursday expressed uncertainty in their battle against inflation and added that they would tighten policy further if need be.

Powell’s comments along with a weak auction of $24 billion in 30-year Treasuries pushed yields higher, casting a shadow on equities and providing support to the dollar. [US/]

“There is no point in corralling the market into expecting cuts until shortly before they look necessary,” said Rob Carnell, Asia-Pacific head of research at ING.

Investors have been looking for signs of U.S. interest rates peaking after the Fed held rates steady last week, a move that bolstered speculation that the rate hiking cycle was over, leading to a short-lived rally in risky assets.

Some investors said Powell’s hawkish leaning on Thursday may have been the result of a recent softening of financial conditions that has come as yields have tumbled in recent weeks.

“The recent decline in U.S. yields has sparked questions about the necessity for the Fed to increase rates further, especially if market yields continue to adjust downward,” Bruno Schneller, managing director at INVICO Asset Management.

The three major U.S. stock indices closed lower on Thursday, snapping the longest winning streaks for the Nasdaq and S&P 500 in two years as market optimism over looser monetary policy faded. [.N]

U.S. rate futures have priced in about 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool, compared to odds of about 70% before Powell’s speech.

Traders would be keeping a close watch on interest rate volatility, said INVICO’s Schneller who noted that recently the markets had seen significant fluctuations.

“A primary cause for this volatility is the debate over whether the current Fed funds rate is overly high or insufficient,” he said.

Chinese stocks eased 0.5%, as worries over the world’s second-biggest economy resurfaced after data on Thursday showed consumer prices dipped back into contraction.

Tapas Strickland, head of market economics at NAB, said the data keeps the pressure on Beijing to continue with its incremental easing in monetary and fiscal policy.

The yield on 10-year Treasury notes stood at 4.6300%, having gained 12 basis points on Thursday, their largest one-day gain in three weeks.

In currency markets, the dollar index tipped slightly down 0.07% from its overnight gains and was last at 105.84. The dollar stood near a one-year high at 151.40 yen and touched one-week highs against the Australian and New Zealand dollars. [FRX/]

Brent rose 74 cents to $80.69 a barrel while U.S. crude rose 65 cents to $76.39 a barrel both up around 0.9% on the day. The oil market has been reeling this week on demand concerns, with a fading war-risk premium triggering a sell-off. [O/R]

Spot gold dipped about 0.2% at $1,954.20 per ounce and on track for their worst week in more than a month, down 1.8%, as elevated yield and stronger dollar weighed.

In cryptocurrencies, bitcoin and ether held near multi-month highs, with renewed speculation over the imminent approval of an exchange-traded bitcoin fund breathing new life into the digital assets.

(Reporting by Ankur Banerjee in Singapore; Editing by Tom Hogue, Christian Schmollinger and Angus MacSwan)

By Ankur Banerjee

SINGAPORE (Reuters) -Asian stocks fell to their lowest in a week on Friday, while the dollar was steady as elevated Treasury yields weighed on sentiment after hawkish comments from U.S. Fed Chair Jerome Powell dashed expectations of a peak in interest rates.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1% to a one-week low of 486.39, on track for a fourth session of losses and a weekly decline of 0.5%.

The sombre mood is set to continue as Europe wakes up, with futures indicating a steeply lower open. Eurostoxx 50 futures were down 0.73%, German DAX futures dropped 0.66% and FTSE futures were 0.78% lower.

U.S. Federal Reserve officials including Powell said on Thursday they are still not sure interest rates are high enough to finish the battle with inflation.

The Fed is “committed to … monetary policy that is sufficiently restrictive to bring inflation down to 2% over time,” Powell said at an International Monetary Fund event.

“We are not confident that we have achieved such a stance.”

Powell’s comments along with a weak auction of $24 billion in 30-year Treasuries pushed yields higher, casting a shadow on equities and providing support to the dollar. [US/]

“There is no point in corralling the market into expecting cuts until shortly before they look necessary,” said Rob Carnell, Asia-Pacific head of research at ING.

Investors have been looking for signs of U.S. interest rates peaking after the Fed held rates steady last week, a move that bolstered speculation that the rate hiking cycle was over, leading to a short-lived rally in risky assets.

Some investors said Powell’s hawkish leaning on Thursday may have been the result of a recent loosening of financial conditions that has come as yields have tumbled in recent weeks.

ING’s Carnell said the Fed needs to keep rates and bond yields reasonably high to achieve the tighter financial conditions that will bring about lower inflation and enable the Fed to ultimately cut rates.

“That rhetoric has to continue, ‘we’re not definitely finished, there’s still a chance of more’ … (you) do that right up until the day before you cut,” he said.

The three major U.S. stock indices closed lower on Thursday, snapping the longest winning streaks for the Nasdaq and S&P 500 in two years as market optimism over looser monetary policy faded. [.N]

U.S. rate futures have priced in about 60% chance of a rate cut at the Fed’s June 2024 meeting, according to the CME’s FedWatch tool, compared to odds of about 70% before Powell’s speech.

Chinese stocks eased 0.6%, while Hong Kong’s Hang Seng Index was 1.6% lower as worries over the world’s second-biggest economy resurfaced after data on Thursday showed consumer prices dipped back into contraction.

Tapas Strickland, head of market economics at NAB, said the data keeps the pressure on Beijing to continue with its incremental easing in monetary and fiscal policy.

The yield on 10-year Treasury notes eased 1.2 basis points to 4.618%, having gained 12 basis points on Thursday, their largest one-day gain in three weeks.

In the currency market, the dollar index held on to its overnight gains and was last at 105.89. The dollar stood near a one-year high at 151.40 yen and touched one-week highs against the Australian and New Zealand dollars. [FRX/]

U.S. crude rose 0.38% to $76.03 per barrel and Brent was at $80.39, up 0.47% on the day. The oil market has been reeling this week on demand concerns, with a fading war-risk premium triggering a sell-off. [O/R]

Spot gold was little changed at $1,956.80 per ounce and on track for their worst week in more than a month, down 1.8%, as elevated yield and stronger dollar weighed.

(Reporting by Ankur Banerjee in Singapore; Editing by Tom Hogue and Christian Schmollinger)