US stocks and Treasuries trimmed their advances as traders contemplated strikes and the prospect of a government shutdown.
(Bloomberg) — US stocks and Treasuries trimmed their advances as traders contemplated strikes and the prospect of a government shutdown.
The S&P 500 eked out a 0.2% gain, while the Nasdaq 100 pared back from a 1.4% jump after the United Auto Workers extended plans for walkouts to more Ford Motor Co. and General Motors Co. plants. The US benchmarks have struggled to recover lost ground this week with both gauges on track for their first negative quarter in a year as the highest interest rates in 22 years dented optimism in the equities market.
Global bonds are poised for their worst monthly selloff since February. Cautious comments from Federal Reserve officials and data suggesting inflation is moderating soothed fears of a more immediate rate hike on Wall Street but the central bank is still left to walk a fine line to avoid a recession.
“Looking ahead, regardless of whether the landing is ultimately hard or soft, we think US and global economic activity is set to slow over the next year,” said Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management. She remains bullish on bonds maturing in five to ten years.
“Falling inflation should bolster the real return on fixed income, despite the recent rebound in energy prices,” she added.
Pershing Square Capital’s Bill Ackman sounded a note of caution on longer-dated Treasuries. The yield on the 30-year has risen around 82 basis points since the end of June and touched about 4.81% Thursday, the highest since 2010. He told CNBC that rate could reach beyond 5%.
Read: Long-Bond Yield’s Biggest Jump Since ‘09 Has Ackman Eying 5%
Stocks and bonds rose Friday, getting a boost after the core personal consumption expenditures price index — which strips out volatile food and energy costs — rose 0.1% in August, less than economists were expecting.
Treasury two-year yields, which are more sensitive to imminent policy moves, fell to 5.04%. A slump in the dollar eased.
“Inflation is continuing to decelerate, meaning the Fed’s aggressive campaign is working,” said Carol Schleif, chief investment officer at BMO Family Office. “The challenge is that core PCE remains almost double the Fed’s 2% target, prompting the Fed to keep the possibility of another rate hike in play.”
High rates around the globe have kept a lid on stocks of late. The July-September quarter has been the worst for MSCI’s all-country index since December, as surging oil prices fanned fears over inflation and economic growth.
Oil declined for the second day after WTI rallied above $94 a barrel earlier this week, crude is headed for its biggest quarterly gain since March 2022.
Key events this week:
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 12:27 p.m. New York time
- The Nasdaq 100 rose 0.6%
- The Dow Jones Industrial Average fell 0.1%
- The MSCI World index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.2% to $1.0584
- The British pound was little changed at $1.2214
- The Japanese yen was little changed at 149.43 per dollar
Cryptocurrencies
- Bitcoin fell 0.8% to $26,867.55
- Ether rose 0.7% to $1,667.87
Bonds
- The yield on 10-year Treasuries declined one basis point to 4.56%
- Germany’s 10-year yield declined nine basis points to 2.84%
- Britain’s 10-year yield declined five basis points to 4.44%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures fell 0.4% to $1,870.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Julia Fanzeres, Rob Verdonck, Abhishek Vishnoi, Tassia Sipahutar and Sujata Rao.
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