A rally in stocks waned as bond yields climbed after a strong manufacturing report offset optimism with jobs data signaling the Federal Reserve is close to ending its hiking cycle.
(Bloomberg) — A rally in stocks waned as bond yields climbed after a strong manufacturing report offset optimism with jobs data signaling the Federal Reserve is close to ending its hiking cycle.
A slide in several tech megacaps weighed on equities, with the S&P 500 little changed ahead of Monday’s US holiday. Tesla Inc. dropped over 4%. Treasury 10-year yields reversed course and rose seven basis points to around 4.2%. Some traders also highlighted remarks from Fed Bank of Cleveland President Loretta Mester, who said inflation remains too high and the labor market is still strong. Oil hit $85 a barrel for the first time since November.
“While today’s employment data were a win for the soft-landing optimists, I think it is irresponsible to assume that the Fed is out of the woods,” said Neil Dutta, head of economics at Renaissance Macro Research. “Growth remains unsustainably strong — strong growth with cyclical momentum at a time when the Fed is taking at least one of its feet off the brake pedal.”
To Hussain Mehdi at HSBC Asset Management, the case for a Fed pause at this month’s meeting is now “overwhelming.” However, it will be “difficult to dodge recession next year as the lagged impact of the Fed’s aggressive tightening cycle continues to feed through and corporate retrenchment gathers pace.”
Mehdi is keeping “a cautious and defensive stance in portfolios.”
Meantime, BlackRock Inc.’s chief investment officer for global fixed income, Rick Rieder, said the cooling labor market supports speculation that the Fed is done raising rates — making bonds more appealing than they have been in months.
“I think you can use this as another benchmark for the fact that we are seeing slack build in the labor force” and it comes “alongside of inflation coming down,” Rieder said on Bloomberg Television Friday. “The Fed should be done. You can put your shoulder behind a bit more of interest-rate exposure than has been the case certainly over the last few months.”
- Tesla revamped the Model 3 sedan with sleeker looks and longer range while slashing prices of its premium vehicles in an all-out push to boost sales.
- Amgen Inc. can move forward with its $27.8 billion takeover of Horizon Therapeutics Plc after the US Federal Trade Commission said Friday that it accepted a binding settlement that the combined company won’t bundle together two of Horizon’s blockbuster drugs.
- Walgreens Boots Alliance Inc.’s Rosalind Brewer stepped down from her post as chief executive officer and board member during a rocky shift to a wider offering of health-care services while the shares have plunged.
- Dell Technologies Inc. climbed after reporting better-than-expected sales of personal computers and data center hardware.
- Broadcom Inc., a supplier of chips to Apple Inc. and a broad swath of the tech industry, fell on a bearish outlook.
- Lululemon Athletica Inc. rose after lifting its full-year outlook as it takes business from competitors and defies the broader retail slump.
- US-listed Chinese stocks advanced after Beijing and Shanghai both ease housing rules, a sign of further government support toward the economy.
Some of the main moves in markets:
- The S&P 500 was little changed as of 12:21 p.m. New York time
- The Nasdaq 100 fell 0.3%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.5% to $1.0786
- The British pound fell 0.7% to $1.2585
- The Japanese yen fell 0.5% to 146.20 per dollar
- Bitcoin fell 0.8% to $25,792.51
- Ether fell 1.2% to $1,630.25
- The yield on 10-year Treasuries advanced seven basis points to 4.18%
- Germany’s 10-year yield advanced eight basis points to 2.55%
- Britain’s 10-year yield advanced seven basis points to 4.43%
- West Texas Intermediate crude rose 2% to $85.31 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Mackenzie, Isabelle Lee and Emily Graffeo.
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