Stocks Claw Back Losses With Fed Rate Path in Play: Markets Wrap
(Bloomberg) -- Stocks staged a partial recovery Monday after a selloff triggered by cooling US jobs data that left economists and traders at odds as to how aggressively the Federal Reserve will cut interest rates.
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Futures on the Nasdaq 100 advanced after the underlying index ended last week with its steepest decline since November 2022. Treasuries reversed some of their recent gains, with two-year yields rising for the first day in five.
The choice facing Fed officials — whether to start easing gradually or to front-load rate cuts — is bound to be contentious. With recession fears also resurfacing, investors are scrutinizing economic data for clues on the likely rate path. Wednesday’s US consumer-inflation numbers are next on the radar.
US data Friday showing weaker payrolls growth reinforced the view that the labor market is cooling and sent stocks reeling. Traders reacted by increasing bets on a 50 basis-point Fed cut this month, although they are assigning higher odds to a 25 basis-point reduction.
“We are leaning towards a 50 basis point cut, front-loading in September,” Nannette Hechler-Fayd’herbe, chief investment officer for EMEA at Bank Lombard Odier, said in an interview with Bloomberg TV. “I don’t think they have much to lose to actually making a bigger cut in September with 50 basis points. It’s a great possibility for them to initiate an insurance against whatever softer data are coming.”
September is proving a volatile month for markets with stocks and commodities both sliding amid concern about waning global growth. In developing markets, borrowers have rushed out $28 billion of bond sales in the first five days of the month, more bonds than at the outset of any previous September, to avoid getting caught in turbulence that could close off refinancing avenues.
Wall Street’s fear gauge — the Cboe Volatility Index — remains elevated after closing at its highest in a month on Friday.
Some analysts are encouraging investors to take advantage of opportunities to position defensively with volatility poised to persist amid concerns over growth and the reaction by policymakers.
“If any investor in the market right now is not expecting volatility they are missing an opportunity to add quality to their portfolio,” Joe Quinlan, head of CIO Market Strategy for Merrill and Bank of America Private Bank, said in an interview with Bloomberg TV.
Among individual stocks, Boeing Co. rose in premarket trading after the planemaker reached a deal with its largest union to avoid a strike. Summit Therapeutics soared after positive clinical trial data for its experimental lung cancer drug.
Some key events this week:
China trade, Tuesday
China’s National People’s Congress standing committee meeting begins, Tuesday
Germany CPI, Tuesday
UK jobless claims, unemployment, Tuesday
Harris-Trump debate, Tuesday
BOJ board member Nakagawa Junko speaks, Wednesday
UK industrial production, Wednesday
US CPI, Wednesday
Japan PPI, Thursday
BOJ board member Naoki Tamura speaks, Thursday
Eurozone ECB rate decision, Thursday
US initial jobless claims, PPI, Thursday
Eurozone industrial production, Friday
France CPI, Friday
ECB Governing Council member Olli Rehn speaks, Friday
US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.6% as of 8:31 a.m. New York time
Nasdaq 100 futures rose 0.6%
Futures on the Dow Jones Industrial Average rose 0.6%
The Stoxx Europe 600 rose 0.5%
The MSCI World Index fell 0.1%
Currencies
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.4% to $1.1044
The British pound fell 0.3% to $1.3089
The Japanese yen fell 0.7% to 143.25 per dollar
Cryptocurrencies
Bitcoin rose 1.3% to $55,064.7
Ether rose 1.1% to $2,302.48
Bonds
The yield on 10-year Treasuries advanced two basis points to 3.73%
Germany’s 10-year yield advanced three basis points to 2.20%
Britain’s 10-year yield advanced two basis points to 3.91%
Commodities
West Texas Intermediate crude rose 1% to $68.37 a barrel
Spot gold rose 0.2% to $2,502.82 an ounce
This story was produced with the assistance of Bloomberg Automation.
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