Tech stocks were leading US equities higher in light trading while Treasuries fell as traders weighed the prospect of a soft landing for the economy against interest rates remaining higher for longer.
(Bloomberg) — Tech stocks were leading US equities higher in light trading while Treasuries fell as traders weighed the prospect of a soft landing for the economy against interest rates remaining higher for longer.
US stocks advanced in a choppy session. Trading in S&P 500 companies was 19% below the 30-day average at this time of day with AI favorite Nvidia Corp. and other tech giants driving gains. Smaller stocks fared worse with the Russell 2000 falling to the lowest in over a month as risk-appetite waned.
Treasury yields ticked higher as high-grade corporate bond sales Monday weighed on prices. The policy sensitive two-year extended an advance into the fourth day to 4.94%, while the 10-year traded at 4.16%.
Traders are betting interest rates will outpace inflation for years to come while investors sitting on record first-half gains are having to contend with central bankers warning they are in no rush to cut interest rates.
“Some retracement of the broad market since July 31 suggests to us a pause that refreshes has likely occurred, rather than the end of the bull market,” John Stoltzfus, chief investment strategist at Oppenheimer & Co., wrote in a research note. “We remain of the view based on improving economic and corporate fundamentals that the US economy could actually skirt a recession this cycle.”
Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management, takes a dimmer view saying the economy is already in a rolling recession that will hit the services sector next.
“Consumption, profit margins and corporate pricing power are yet to be reset, as the delayed impact of tighter policy should ultimately pressure nominal gains,” she wrote.
Updates from China unnerved markets on Monday amid concerns about Country Garden Holdings Co. and private-wealth manager, Zhongzhi Enterprise Group Co. Country Garden, once China’s biggest developer, has emerged as the latest flashpoint of the country’s property woes.
“The more days that go by without a comprehensive fiscal stimulus plan the more clear it becomes there will not be one,” Brad Bechtel, a Jefferies strategist said of China’s central bank. “The big bazooka is not coming.”
Focus later this week will be on minutes of the Federal Reserve’s latest policy meeting as traders seek clues on the central bank’s next move. Investors who’d bet on a pivot to easier policy this year are having to adjust their bets as officials signal they will keep interest rates higher for longer.
In emerging markets, Argentina’s already-distressed debt sagged after a populist who vowed to burn down the central bank won surprisingly strong support in a primary vote.
Read more: Dog-Loving, Central-Bank-Hating Economist Upends Argentine Polls
The offshore yuan fell to its weakest level since November while the US dollar strengthened. In commodities, gold and crude slumped.
Corporate Highlights:
- US Steel Corp. surged 32% after the company rejected a $7.25 billion takeover offer from peer Cleveland-Cliffs Inc. and said it will instead start a review of its strategic options.
- Tesla Inc. slipped 2.0%, triggering a selloff for other producers of electric vehicles, after it rolled out a new round of price cuts in China.
- Nikola Corp. plummeted after the manufacturer announced it will recall trucks and temporarily stop sales after several battery fires.
Key events this week:
- China medium-term lending, retail sales, industrial production, fixed-asset investment, FX net settlement, Tuesday
- Japan industrial production, GDP, Tuesday
- UK jobless claims, unemployment, Tuesday
- US retail sales, empire manufacturing, business inventories, cross-border investment, Tuesday
- Reserve Bank of Australia policy minutes, Tuesday
- Federal Reserve Bank of Minneapolis President Neel Kashkari speaks, Tuesday
- China property prices, Wednesday
- Eurozone industrial production, GDP, Wednesday
- UK CPI, Wednesday
- US FOMC minutes, housing starts, industrial production, Wednesday
- US initial jobless claims, US Conf. Board leading index, Thursday
- Eurozone CPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.4% as of 12:09 p.m. New York time
- The Nasdaq 100 rose 0.8%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index was little changed
- The Russell 2000 Index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to $1.0929
- The British pound was little changed at $1.2702
- The Japanese yen fell 0.2% to 145.22 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to $29,603.25
- Ether was little changed at $1,852.5
Bonds
- The yield on 10-year Treasuries was little changed at 4.16%
- Germany’s 10-year yield advanced one basis point to 2.64%
- Britain’s 10-year yield advanced four basis points to 4.57%
Commodities
- West Texas Intermediate crude fell 0.9% to $82.48 a barrel
- Gold futures fell 0.2% to $1,942.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher.
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