Stocks climbed the most since June, while bond yields fell after economic reports in both the US and Europe fueled bets that major central banks will pause their interest-rate hikes to prevent a recession.
(Bloomberg) — Stocks climbed the most since June, while bond yields fell after economic reports in both the US and Europe fueled bets that major central banks will pause their interest-rate hikes to prevent a recession.
In late hours, a $200 billion exchange-traded fund tracking the Nasdaq 100 (QQQ) gained after a bullish revenue outlook from Nvidia Corp. — the chipmaker at the heart of the artificial-intelligence frenzy that has driven the equity-market higher this year. The company also jumped in extended trading after approving an additional $25 billion in buybacks.
The highly anticipated results are expected to impact investment decisions over the next few months. The market is also awaiting Jerome Powell’s speech Friday at the Federal Reserve Bank of Kansas City’s Jackson Hole Economic Policy Symposium for clues on the outlook for policy.
“There’s been an ongoing debate on whether Nvidia is even more important to the broad trajectory of markets than Fed Chair Powell’s comments from Jackson Hole on Friday,” said Quincy Krosby, chief global strategist at LPL Financial.
Bonds, Fed
Treasury two-year US yields, which are more sensitive to imminent policy moves, sank below 5% as data showed American business activity barely expanded on subdued customer demand. The 10-year German rate also slid as a contraction of private-sector activity in the euro area intensified. To Jennifer McKeown at Capital Economics, August’s flash Purchasing Managers’ indexes “strongly suggest that we are at or close to the peak in monetary tightening cycles.”
Another relevant economic signal came from the US mortgage industry, with applications for home purchases tumbling to an almost three-decade low. Separate data showed new-home sales hit the highest in over a year — as a surge in mortgage rates kept inventory on the resale market extremely limited. Traders also weighed a US government report saying that job growth in the year through March will probably be revised down by 306,000 — a smaller adjustment than some economists expected.
The advance in bonds Wednesday was also attributed to technical factors. That’s after a Treasury selloff that recently drove 10-year yields to the highest since late 2007 on speculation that interest rates would remain elevated for longer to curb inflation — even if the Fed decides to pause its hiking campaign in September.
Investors also sifted through a batch of earnings from retailers. Kohl’s Corp. and Urban Outfitters Inc. climbed on earnings that beat estimates while Abercrombie & Fitch Co. advanced after boosting its full-year outlook. Foot Locker Inc. sank after cutting its full-year forecast and reporting results that fell short of Wall Street’s expectations amid concern over weakening spending patterns.
Corporate Highlights
- Esmark Inc. said it won’t make a takeover offer for US Steel Corp., citing the United Steelworkers’ support for a rival $7.25 billion bid from Cleveland-Cliffs Inc.
- WeWork Inc. is rounding up advisers for help with a restructuring as it struggles with a heavy debt load and poor financial performance, according to people with knowledge of the matter.
- Luxury builder Toll Brothers Inc. gained after reporting stronger-than-expected quarterly orders and raising its sales expectations as tight supplies of existing homes fueled demand for new ones.
- Advance Auto Parts Inc. climbed after naming a new chief executive officer and starting a strategic review of the business as it struggles to keep up with inflation.
- Grab Holdings Ltd. brought forward its profitability target after posting a narrower loss in the second quarter, buoyed by extensive cost cuts at the ride-hailing and food-delivery company. The shares rose.
- Peloton Interactive Inc. slumped after the fitness company gave a weak revenue forecast for the current quarter and said costs for a product recall were significantly more expensive than it anticipated.
- Mallinckrodt Plc plans to file bankruptcy for the second time in less than three years after battling business declines and struggling to keep up with payments on a $1.7 billion settlement resolving a wave of lawsuits accusing the drugmaker of fueling the US opioid epidemic.
Key events this week:
- US initial jobless claims, durable goods, Thursday
- Kansas City Fed’s annual economic policy symposium in Jackson Hole begins, Thursday
- Japan Tokyo CPI, Friday
- US University of Michigan consumer sentiment, Friday
- Fed Chair Jerome Powell, ECB President Christine Lagarde to address Jackson Hole conference, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 1.1% as of 4 p.m. New York time
- The Nasdaq 100 rose 1.6%
- The Dow Jones Industrial Average rose 0.5%
- The MSCI World index rose 1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.2% to $1.0863
- The British pound fell 0.1% to $1.2718
- The Japanese yen rose 0.7% to 144.87 per dollar
Cryptocurrencies
- Bitcoin rose 2.9% to $26,603.63
- Ether rose 3.4% to $1,685.8
Bonds
- The yield on 10-year Treasuries declined 14 basis points to 4.18%
- Germany’s 10-year yield declined 13 basis points to 2.52%
- Britain’s 10-year yield declined 18 basis points to 4.47%
Commodities
- West Texas Intermediate crude fell 1.3% to $78.62 a barrel
- Gold futures rose 1% to $1,945.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller, Tassia Sipahutar, Namitha Jagadeesh, Sagarika Jaisinghani and Isabelle Lee.
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