The selloff in stocks and bonds eased Wednesday as traders parsed US data and raised bets that the Federal Reserve can refrain from further interest rate increases.
(Bloomberg) — The selloff in stocks and bonds eased Wednesday as traders parsed US data and raised bets that the Federal Reserve can refrain from further interest rate increases.
Ten-year Treasury yields were lower on the day after the rate on the benchmark had reached as high as 4.88% during Asian trading hours. Traders are now pricing a less than one-in-five chance of an increase in November, down from one-in-three previously. Stocks chopped before turning higher as large-cap tech names including Microsoft Corp. and Amazon.com Inc. powered gains in the Nasdaq 100 and S&P 500 indexes.
US companies added the fewest number of jobs since the start of 2021 in September, suggesting labor demand in several industries is slowing. Private payrolls rose 89,000 last month after climbing 180,000 in August, according to the survey from the ADP Research Institute in collaboration with Stanford Digital Economy Lab. The Institute for Supply Management’s services index pulled back modestly in September falling to 53.6, the lowest level this year, though readings above 50 indicate expansion.
“Stock investors have been hoping the labor market will loosen up and give the Fed enough breathing room to dial down its hawkishness,” said Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office. “ADP isn’t necessarily a reliable predictor of the government’s monthly jobs data, but if Friday’s report also shows the labor market is cooling, stock investors may worry a little less about indefinitely higher interest rates.”
The latest leg of the selloff has been fueled by Tuesday’s better-than-expected US job data, as well as a slew of hawkish comments from Federal Reserve officials. As conviction grew that US interest rates could rise further from current 22-year highs, 30-year yields touched 5% for the first time since 2007.
Volatility could make another appearance when Friday’s payrolls numbers hit as traders search for signs that the economy is cooling off and the Fed can pull back from its hawkish higher-for-longer messaging.
“Recent developments support our view that markets had become overly confident in pricing a rapid easing of the Fed’s monetary policy,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management. “While we expect equity and bond market conditions to improve, we forecast choppy and rangebound trading in equity markets in the near term.”
Key events this week:
- China has week-long holiday
- France industrial production, Thursday
- BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
- US trade, initial jobless claims, Thursday
- San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
- Germany factory orders, Friday
- US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.5% as of 12:10 p.m. New York time
- The Nasdaq 100 rose 1.1%
- The Dow Jones Industrial Average rose 0.3%
- The MSCI World index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.5% to $1.0520
- The British pound rose 0.7% to $1.2156
- The Japanese yen rose 0.1% to 148.84 per dollar
Cryptocurrencies
- Bitcoin rose 0.1% to $27,424.98
- Ether fell 1.5% to $1,632.68
Bonds
- The yield on 10-year Treasuries declined six basis points to 4.73%
- Germany’s 10-year yield declined five basis points to 2.92%
- Britain’s 10-year yield declined two basis points to 4.58%
Commodities
- West Texas Intermediate crude fell 4.4% to $85.26 a barrel
- Gold futures fell 0.1% to $1,839 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Macarena Muñoz, Sujata Rao, Michael Msika and Tatiana Darie.
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