Stocks and Bonds Rise as Weak Data Fuel Fed Bets: Markets Wrap


(Bloomberg) — Wall Street traders sent stocks higher and bonds yields fell as a string of weaker-than-estimated economic data reinforced the case for the Federal Reserve to start cutting rates this year.

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In a shortened session ahead of the US holiday, the S&P 500 headed toward a fresh all-time high on bets Fed policy easing will keep fueling Corporate America. Treasuries climbed across the curve as data showed US services sector contracted at the fastest pace in four years, private payrolls rose at a more moderate pace while continuing jobless claims increased for a ninth straight week.

Traders will get further insight into the state of the labor market Friday with the release of the monthly employment report. Economists anticipate a 190,000 gain in nonfarm payrolls, a step-down from the previous month.

“If the data cooperate, we believe a September cut remains very much in play,” said Win Thin and Elias Haddad at Brown Brothers Harriman & Co.

Treasury 10-year yields fell nine basis points to 4.34%. Swap traders are projecting almost two rate cuts in 2024, with the first in November — though bets on a September readuction increased. The dollar headed toward its biggest drop since mid-May. The S&P 500 hovered around 5,520. Tesla Inc. rallied, while Amazon.com Inc. fell.

US PREVIEW: Minutes to Show Fed’s Rate-Cut Forecast a Close Call

Fed Chair Jerome Powell said this week the latest economic data suggest inflation is getting back on a downward path, but emphasized officials need more evidence before lowering interest rates. When he was asked what keeps him up at night, he pointed to the delicate balance between taming inflation and avoiding a significant deterioration in the labor market.

Meantime, Fed Bank of New York President John Williams, who has deeply researched the natural rate of interest known as r-star, pushed back against recent commentary that it has risen since the pandemic.

The idea of a long-run natural rate of interest, which prevails when the economy is not responding to shocks and is growing at its potential, is central to monetary policy but cannot be directly observed. Officials aim to raise rates above the neutral level to cool the economy and fight inflation.

Corporate Highlights:

  • Paramount Global jumped after a merger deal with independent film and TV producer Skydance Media was revived.

  • Jeff Bezos disclosed a plan to unload 25 million additional shares of Amazon.com Inc. worth $5 billion on the day the stock hit a fresh record.

  • Southwest Airlines Co. has adopted a shareholder rights plan to defend against a push for a leadership overhaul by activist firm Elliott Investment Management.

  • SoftBank Group Corp. hit a record high, a vote of confidence in Masayoshi Son’s ambitions to ramp up investments in AI and semiconductors.

  • Trading house Trafigura Group Pte Ltd has bought a gas-fired power plant in the US, part of a growing wave of merchants piling into supplying volatile electricity markets.

Key events this week:

  • UK general election, Thursday

  • US Independence Day holiday, Thursday

  • Eurozone retail sales, Friday

  • US jobs report, Friday

  • Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 0.2% as of 10:53 a.m. New York time

  • The Nasdaq 100 rose 0.3%

  • The Dow Jones Industrial Average fell 0.2%

  • The Stoxx Europe 600 rose 0.8%

  • The MSCI World Index rose 0.5%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.4%

  • The euro rose 0.6% to $1.0807

  • The British pound rose 0.6% to $1.2766

  • The Japanese yen rose 0.2% to 161.17 per dollar

Cryptocurrencies

  • Bitcoin fell 2.7% to $60,236.01

  • Ether fell 3.2% to $3,306.22

Bonds

  • The yield on 10-year Treasuries declined nine basis points to 4.34%

  • Germany’s 10-year yield declined three basis points to 2.57%

  • Britain’s 10-year yield declined nine basis points to 4.15%

Commodities

  • West Texas Intermediate crude fell 0.4% to $82.46 a barrel

  • Spot gold rose 1.5% to $2,363.51 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from John Viljoen, Sujata Rao and Winnie Hsu.

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