Wall Street traders pushed the stock market higher, while bond yields retreated after economic reports bolstered speculation the Federal Reserve will be able to pause its interest-rate hikes in September.
(Bloomberg) — Wall Street traders pushed the stock market higher, while bond yields retreated after economic reports bolstered speculation the Federal Reserve will be able to pause its interest-rate hikes in September.
The S&P 500 climbed 1%, heading toward its longest winning streak in a month. A rally in megacaps like Tesla Inc. and Nvidia Corp. sent the Nasdaq 100 up 2%. Treasury two-year yields, which are more sensitive to imminent policy moves, dropped 17 basis points to 4.88%. Bitcoin rallied 7% as a US court paved the way for the first exchange-traded fund tracking the cryptocurrency.
Swap contracts showed lower wagers on a Fed hike in 2023 and a greater chance of a policy pivot in the first half of 2024. Traders are currently pricing in a 56% probability of a quarter-point rate increase in November — down from 75% earlier Tuesday. They also brought forward bets on the expected start of rate cuts to June from July.
US job openings fell by more than expected to 8.83 million — a more than two-year low — offering fresh evidence that labor demand is slowing down. A separate report showed consumer confidence dropped the most in two years as souring views on jobs, higher borrowing costs and lingering inflation curbed optimism.
“The Fed reiterated its commitment to be data-dependent, and with reports like this, the Fed can most likely keep rates unchanged in September,” said Jeffrey Roach, chief economist at LPL Financial. “Investors should expect a softening labor report this Friday, further cementing the thesis that the Fed is getting close to finishing its tightening cycle.”
‘Answer to the Fed’s Prayers’
From the Fed’s perspective, the week is off to a promising start — with the Job Openings and Labor Turnover Survey much waker than expected, alongside downward revisions. Further softness over the next few months looks “plausible,” and that could lead to a cooler labor market and sustainably lower wage growth, according to Craig Erlam, senior market analyst at Oanda.
“Today’s JOLTS report was an answer to the Fed’s prayers,” offering more evidence of a “cooling economy,” said Ronald Temple, chief market strategist at Lazard.
The data precede Friday’s monthly jobs report, which is currently forecast to show employers boosted their payrolls by 170,000 in August, while the unemployment rate held at a historically low 3.5%. The average increase in job growth over the past three months would be the smallest since the start of 2021.
- Coinbase Global Inc. led a rally in cryptocurrency-related stocks after Grayscale Investments got backing from a federal court to launch the first Bitcoin ETF in the US — a watershed moment in the industry’s quest to tap billions of dollars from everyday investors.
- The $2.8 billion SPDR S&P Regional Banking ETF rose even after US regulators unveiled a proposal to boost oversight of midsize lenders and require them to be better prepared for potential failures.
- Apple Inc. has set Sept. 12 as the date for its biggest product-upgrade event of the year, when it’s set to unveil the iPhone 15 line and next-generation smartwatches.
- A gauge of US-listed Chinese stocks rallied as Bloomberg News reported that the nation’s largest banks are preparing to cut interest rates on existing mortgages and deposits, the latest state-directed measures to shore up growth in the world’s second-largest economy.
- Best Buy Co. climbed after executives said that a painful sales slump in consumer electronics and household appliances is showing signs of easing.
- Oracle Corp. gained after UBS Group AG upgraded the software company to buy from neutral.
- Pharmaceutical giants spanning Bristol-Myers Squibb Co. to Johnson & Johnson and Eli Lilly & Co. are the first targets of President Joe Biden’s historic foray into bargaining with drugmakers to lower the cost of medicine.
Key events this week:
- 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:
- The S&P 500 rose 1.3% as of 12:35 p.m. New York time
- The Nasdaq 100 rose 2%
- The Dow Jones Industrial Average rose 0.7%
- The MSCI World index rose 1.2%
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.3% to $1.0849
- The British pound was little changed at $1.2610
- The Japanese yen rose 0.3% to 146.06 per dollar
- Bitcoin rose 7.2% to $27,843.88
- Ether rose 5.2% to $1,731.36
- The yield on 10-year Treasuries declined eight basis points to 4.12%
- Germany’s 10-year yield declined five basis points to 2.51%
- Britain’s 10-year yield declined two basis points to 4.42%
- West Texas Intermediate crude rose 0.6% to $80.55 a barrel
- Gold futures rose 0.8% to $1,962.30 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller and Robert Brand.
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