Stocks See Mild Gains at Start of Data-Packed Week: Markets Wrap

Stocks rose and bond yields fell at the start of a week chock-full of economic data that will help shape the outlook for Federal Reserve policy.

(Bloomberg) — Stocks rose and bond yields fell at the start of a week chock-full of economic data that will help shape the outlook for Federal Reserve policy.

The S&P 500 saw mild gains, remaining near 4,400. Trading volume was 30% below the average of the past month. 3M Co. rallied as Bloomberg News reported a tentative agreement to pay over $5.5 billion to resolve lawsuits claiming it sold defective combat earplugs. Megacaps were mixed, with Facebook’s parent Meta Platforms Inc. gaining and Tesla Inc. down. A $45 billion auction of two-year Treasuries drew the highest yield since 2006.

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August’s risk-off mood showed some signs of abating, but the US equity benchmark is still poised for its worst month of 2023 after a higher-for-longer rates narrative took hold. Fed Chair Jerome Powell stuck to the script in his Jackson Hole speech Friday, saying officials are “prepared to raise rates further if appropriate,” while stressing the central bank would “proceed carefully” — guided by economic data.

For investors, that means figures like Friday’s jobs data will be crucial.

“This week is important because it has the chance to either reinforce the ‘soft/no landing’ and ‘disinflation’ pillars of the rally, or potentially undermine them,” said Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter. “The former will likely result in a reflex rally, while the latter could open up a sharp drop in stocks. We’ll be watching closely.”

Employment growth in the US probably cooled and wage increases moderated, suggesting a further tempering of inflation risks that reduces the urgency for another rate hike. Other labor-market figures are seen showing fewer job openings than a month earlier, indicating supply and demand are coming into better balance. Fed officials will also get a fresh read on their preferred inflation gauge — the personal consumption expenditures price index minus food and energy.

There’s enough ambiguity about the recent strength of jobs, wage, and inflation data to keep the Fed on hold in September, according to Seema Shah, chief global strategist at Principal Asset Management. By November, the economy should be showing clearer signs of softening, she added.

“The Fed may raise again, or they may not; it all depends on how the economy is doing,” Shah noted. “Our expectation is that Fed policy rates have now peaked. Of course, the Fed will need to remain alert to inflation pressures — as long as economic growth is strong, a resurgence in inflation is a risk.”

Chart watchers looking for clues about the equity market’s next direction have a few crucial levels to monitor.

Mark Newton at Fundstrat Global Advisors, has his eyes on 4,440 for the S&P 500. That level lies near a 38.2% Fibonacci retracement — and as such it marks a key hurdle for the index to clear in order to continue the rebound. Meantime, the gauge’s companies are now evenly split, with half above and half below their 200-day moving-average lines. That’s a departure from late July, when two-third of the members traded above those levels.

Corporate Highlights:

US-listed Chinese stocks climbed as the Asian nation took steps to lure investors.
American Airlines Group Inc. was ordered to pay a $4.1 million fine, the largest such penalty to date, for allowing aircraft to sit on the ground for three hours or more without giving passengers a chance to exit.
Hawaiian Electric Industries Inc. soared after the utility pushed back against a lawsuit filed by Maui County that accused the company of starting the deadly Lahaina fire, suggesting that county’s fire department may be responsible for losing control of the blaze.
Danaher Corp. said it will acquire Abcam Plc in a deal worth $5.7 billion, beating out rivals in a race to acquire the UK-based maker of supplies for the life-sciences industry whose technologies are used by thousands of researchers.
CrowdStrike Holdings Inc. fell as Morgan Stanley downgraded the software company to equal-weight from overweight ahead of its results.
Novocure Ltd. sank after the company said a late-stage trial of its ovarian cancer drug did not meet its primary endpoint of overall survival at the final analysis.

Read: Five Key Charts to Watch in Global Commodities This Week

Key events this week:

US Conference Board consumer confidence, Tuesday
Eurozone economic confidence, consumer confidence, Wednesday
US GDP, wholesale inventories, pending home sales, Wednesday
China manufacturing PMI, non-manufacturing PMI, Thursday
Japan industrial production, retail sales, Thursday
Eurozone CPI, unemployment, Thursday
ECB publishes account of July monetary policy meeting, Thursday
US personal spending and income, initial jobless claims, Thursday
China Caixin manufacturing PMI, Friday
Eurozone S&P Global Eurozone Manufacturing PMI, Friday
South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
Boston Fed President Susan Collins speaks at virtual event, Friday.
US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 12:26 p.m. New York time
The Nasdaq 100 rose 0.2%
The Dow Jones Industrial Average rose 0.4%
The MSCI World index rose 0.6%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro rose 0.1% to $1.0807
The British pound rose 0.1% to $1.2594
The Japanese yen was little changed at 146.46 per dollar

Cryptocurrencies

Bitcoin rose 0.2% to $26,124.84
Ether fell 0.2% to $1,650.73

Bonds

The yield on 10-year Treasuries declined two basis points to 4.22%
Germany’s 10-year yield was little changed at 2.56%
Britain’s 10-year yield advanced two basis points to 4.44%

Commodities

West Texas Intermediate crude was little changed
Gold futures rose 0.6% to $1,952 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Brett Miller, Tassia Sipahutar, Robert Brand, Isabelle Lee, Vildana Hajric and Elena Popina.

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