Stocks rose after strong economic reports revived speculation the Federal Reserve will be able to engineer a soft landing even if it keeps interest rates higher for longer. The euro fell on bets the European Central Bank will stay on hold after hiking on Thursday.
(Bloomberg) — Stocks rose after strong economic reports revived speculation the Federal Reserve will be able to engineer a soft landing even if it keeps interest rates higher for longer. The euro fell on bets the European Central Bank will stay on hold after hiking on Thursday.
The S&P 500 approached 4,500. Earlier in the session, equity futures pared gains as both retail sales and producer prices beat estimates. Two-year yields and the dollar edged up. West Texas Intermediate oil hit $90 a barrel. Arm Holdings Plc is indicated to open higher at $57 a share in its New York trading debut. General Electric Co. climbed on bullish comments from its finance chief. Facebook parent Meta Platforms Inc. led gains in megacaps. Adobe Inc. is due to report results after the closing bell, and traders will be focused on the software company’s artificial-intelligence outlook.
Read: US Exceptionalism Leaves the Euro in World of Hurt: Surveillance
“Stocks are higher after another round of impressive US economic data suggests the consumer is still doing just fine,” said Edward Moya, senior market analyst for the Americas at Oanda. “Wall Street seems content with the risk of one more Fed rate hike as consumer resilience is expected to gradually weaken. While the US growth story is still alive, the outlook for Europe remains uninspiring as stagflation risks grow.”
The latest data supports our view that the US economy is headed for a period of moderate growth, avoiding a recession over the coming 12 months, according to Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management.
“That should support equities,” she noted. “However, uncertainty is likely to keep broad equity markets choppy and rangebound.”
Read: Upbeat Consumers Can Support Equities
Investors are pushing up expectations for shorter-term US inflation as oil prices rise. The two-year breakeven rate has risen to its highest point since April. A measure of expected inflation over the next five years topped 2.3% — marking the upper end of a range since late July.
Bond traders have spent most of the last two months worrying about persistent inflation and an economy that seems to be running hot, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. The most-recent economic data just reinforced that, he noted.
“The Fed has indicated that they want to slow down the pace of rate increases, and for that reason they are still likely to keep rates unchanged at next week’s meeting, but all of the data that is coming in higher than expected is going to put pressure on them to raise rates again at the following meeting,” Zaccarelli added.
Bridgewater Associates LP founder Ray Dalio said he doesn’t want to own bonds and prefers cash, highlighting difficulties investors face as global central banks try to manage inflation. Meantime, the Fed’s former Vice Chair Richard Clarida said fiscal policy risk is more likely to drive up US bond yields than further tightening from the central bank.
Traders also continued to monitor negotiations between the United Auto Workers and automakers to prevent a strike. An extended shutdown at Ford Motor Co., General Motors Co. and Stellantis NV risks triggering a recession in swing states like Michigan — while reviving inflation for car prices.
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- Delta Air Lines Inc. reduced its expectations for third-quarter profit on higher fuel prices and larger-than-expected maintenance costs, but it reaffirmed its full-year guidance on earnings.
- AMC Entertainment Holdings Inc. climbed as the cinema chain said it raised $325.5 million through the sale of 40 million shares.
- HP Inc. fell after Warren Buffett’s Berkshire Hathaway said it sold $158.5 million worth of shares of the personal-computer maker.
- Visa Inc. dropped as the company took the first step to let the biggest US banks sell their shares in the world’s largest payments network. While Jefferies expects the proposal to produce a near-term overhang in the stock, Morgan Stanley believes it might relieve some pressure.
- Microsoft Corp.’s attempt at avoiding deeper European Union scrutiny of its Teams video-conferencing app fell flat with the bloc’s antitrust enforcers readying a formal complaint against the firm’s conduct.
- MGM Resorts International was hacked by the same group of attackers that breached Caesars Entertainment Inc. weeks earlier, according to four people familiar with the matter.
- Lazard Ltd.’s Peter Orszag is setting fresh targets for the 175-year-old investment bank, including doubling revenue by the end of the decade.
Key events this week:
- US retail sales, PPI, business inventories, initial jobless claims, Thursday
- China property prices, retail sales, industrial production, Friday
- US industrial production, University of Michigan consumer sentiment, Empire Manufacturing index, Friday
Some of the main moves in markets:
- The S&P 500 rose 0.6% as of 11:42 a.m. New York time
- The Nasdaq 100 rose 0.5%
- The Dow Jones Industrial Average rose 0.6%
- The Stoxx Europe 600 rose 1.5%
- The MSCI World index rose 0.7%
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.6% to $1.0661
- The British pound fell 0.7% to $1.2407
- The Japanese yen rose 0.2% to 147.18 per dollar
- Bitcoin rose 1.5% to $26,607.59
- Ether rose 1.7% to $1,631.31
- The yield on 10-year Treasuries advanced three basis points to 4.27%
- Germany’s 10-year yield declined six basis points to 2.60%
- Britain’s 10-year yield declined six basis points to 4.29%
- West Texas Intermediate crude rose 1.4% to $89.78 a barrel
- Gold futures fell 0.3% to $1,927.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee and Felice Maranz.
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