Stocks, bonds and the dollar saw small moves at the start of a busy week for major central banks, with an advance in Brent oil to around $95 adding to inflation concerns. Bitcoin topped $27,000.
(Bloomberg) — Stocks, bonds and the dollar saw small moves at the start of a busy week for major central banks, with an advance in Brent oil to around $95 adding to inflation concerns. Bitcoin topped $27,000.
The S&P 500 edged higher. Energy producers climbed, while airlines fell as oil extended a rally driven by resilient demand and supply curbs from Saudi Arabia and Russia. Apple Inc. led gains in megacaps. Tesla Inc. dropped as Goldman Sachs Group Inc. lowered its earnings estimates for the electric-vehicle giant. Treasury 10-year yields hovered near the highest levels since 2007, and those on two-year notes remained above 5%.
Read: Powell & Co. Risk Wage-Price Spiral as Labor Fumes: Surveillance
With Federal Reserve officials widely expected to keep rates on hold Wednesday, traders will be focused on the so-called dot plot summary of economic forecasts. The two main questions are whether policymakers will retain their projections for one more 25 basis-point hike by year-end — and how much easing they are penciling in for 2024. In June, they projected 1 percentage point of cuts.
“Ongoing questions about Fed policy ‒ how high and for how long? ‒ almost ensure near-term stock activity will remain choppy, although longer-term investors who take their cue from earnings should have an opportunity to benefit,” said Robert Teeter, managing director of Silvercrest Asset Management. “Bond markets continue to maintain a dissenting ‘show me’ stance that assumes rates will remain elevated well into 2024, despite inflation conditions that have largely normalized.”
The Fed will probably continue to sound hawkish, with one remaining rate hike still penciled in for 2023 and the prospect of only very slow easing over the next two years, according to David Kelly, chief global strategist at J.P. Morgan Asset Management. Still, while policymakers may plan for a very gentle decline in rates, there’s risk of an economic downturn that would precipitate much more rapid easing, he noted.
“It makes sense to be well diversified, with a relatively defensive position across equities and extending duration in within fixed income, as the risk of an economic stumble grows on the descent from the mountain of monetary tightening, Kelly added.
Lisa Shalett at Morgan Stanley Wealth Management says that while bullish investors have continued to harp on progress for headline inflation, a key metric closely watched by Fed Chair Jerome Powell suggests a “higher-for-longer” rate path.
“US equity markets are definitively pricing a successful soft landing, with rates peaking and economic and corporate earnings growth reaccelerating,” she noted. “We remain skeptical of the growth reacceleration/margin expansion argument of the bull case. At best, we see US equities rangebound over the next six to nine months, with the back and forth between earnings and multiples producing only churn.”
Read: Morgan Stanley’s Wilson Says Clients See Tough 2024 for Stocks
To Paul Nolte at Murphy & Sylvest Wealth Management, the two weakest months of the year are living up to expectations and following the typical pattern.
“That playbook would argue for further weakness into mid/late October before a year-end rally,” Nolte added. “Much of the rally is on the back of expectations that earnings will rise this quarter, for the first year-over-year gain in over a year. Those higher earnings typically push stocks higher, but much of the market is already richly priced on a historical basis, so there may not be much room to push.”
- Instacart, officially Maplebear Inc., is seeking to raise as much as $660 million Monday at a valuation of more than $9 billion and begin trading Tuesday.
- Micron Technology Inc. rose after the chipmaker was raised to buy from hold at Deutsche Bank AG, with the broker noting that prices for DRAM chips have started to improve faster than expected.
- DoorDash Inc. gained after Mizuho Securities upgraded the food-delivery company to buy from neutral.
- Carvana Co. advanced after Wedbush upgraded the online platform for buying used cars to neutral from underperform.
Key events this week:
- This week, Ukrainian President Volodymyr Zelenskiy is expected to meet with US President Joe Biden at the White House, attend United Nations General Assembly in New York.
- Reserve Bank of Australia issues minutes of September’s policy meeting, Tuesday
- OECD releases interim economic outlook report on the global economy, Tuesday
- Eurozone CPI, Tuesday
- Bloomberg Future of Finance Conference in Frankfurt, with speakers to include German Finance Minister Christian Lindner, Tuesday
- US housing starts, Tuesday
- Japan trade, Wednesday
- China loan prime rates, Wednesday
- UK CPI, Wednesday
- Federal Reserve policy meeting followed by Fed Chair Jerome Powell’s news conference, Wednesday
- Bank of Canada issues summary of September’s policy meeting, Wednesday
- Eurozone consumer confidence, Thursday
- Bank of England policy meeting, Thursday
- US leading index, initial jobless claims, existing home sales, Thursday
- China’s Bund Summit, Friday
- Japan CPI, PMIs, Friday
- Bank of Japan rate decision, Friday
- Eurozone S&P Global Eurozone PMIs, Friday
- US S&P Global Manufacturing PMI, Friday
Some of the main moves in markets:
- The S&P 500 rose 0.3% as of 12:09 p.m. New York time
- The Nasdaq 100 rose 0.3%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 1.1%
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.3% to $1.0687
- The British pound rose 0.1% to $1.2397
- The Japanese yen rose 0.1% to 147.69 per dollar
- Bitcoin rose 3.3% to $27,310.6
- Ether rose 2.4% to $1,657.4
- The yield on 10-year Treasuries was little changed at 4.33%
- Germany’s 10-year yield advanced three basis points to 2.71%
- Britain’s 10-year yield advanced three basis points to 4.39%
- West Texas Intermediate crude rose 1.3% to $91.96 a barrel
- Gold futures rose 0.2% to $1,950.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric and Isabelle Lee.
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