‘Mag Seven’ Rally as Nvidia’s Winning Run Hits 14%: Markets Wrap

(Bloomberg) — The world’s largest technology companies drove stocks higher, with the market rebounding from its worst session in a month. A rout in Treasuries eased as bets on Federal Reserve rate cuts stabilized. Oil sank.

Equities closed within a striking distance of their all-time highs, with the S&P 500 up 1%. Chipmakers led gains on Tuesday as Nvidia Corp. extended a five-day rally to 14%. A Bloomberg gauge of the “Magnificent Seven” megacaps climbed 1.7%. Wall Street’s favorite volatility gauge — the VIX — dropped from its highest since August.

“We expect equities will ‘back and filling’ in October as the earnings season begins,” said Craig Johnson at Piper Sandler. “Investors should use ‘health’ pullbacks that confirm key support to add to positions.”

Traders also waded through remarks from US policymakers.

Fed Bank of Boston President Susan Collins noted that rate cuts should be careful and data-based. Her Atlanta counterpart Raphael Bostic said while risks to inflation have come down, threats to the labor market have risen, though the economy is still strong. Governor Adriana Kugler said officials should keep the focus on bringing inflation to target, with a “balanced approach” that avoids a slowdown in jobs. 

“The US data is not so strong that the Federal Reserve’s contribution to the global rate-cutting cycle looks set to end,” said Mark Haefele at UBS Global Wealth Management. “We therefore maintain our conviction for investors to position for lower rates.”

The S&P 500 topped 5,750. Honeywell International Inc. gained on plans to spin off its advanced materials division. Energy stocks joined oil lower and US-listed Chinese stocks tumbled as Beijing stopped short of launching more major stimulus. Roblox Corp. dropped as Hindenburg Research said it’s betting against the gaming platform. 

Treasury 10-year yields were little changed at 4.02%. A $58 billion sale of three-year Treasuries was soft. West Texas Intermediate crude fell 4.6% to $73.57 a barrel.

Mohamed El-Erian says the guessing game that’s taking place over the Fed’s path for monetary policy is creating market volatility.

“Markets are all over the place. In the last 15 days the probability of a 50 basis point cut in November has gone from over 60% to zero. November is next month,” El-Erian, the president of Queens’ College, Cambridge, told Bloomberg Television on Tuesday. 

“That is how much uncertainty there has been in this market. These are massive moves based on data points,” he added.

Billionaire investor Ray Dalio said he doesn’t anticipate the Fe making “significant cuts in rates,” and that bonds are a risky investment given recent fluctuations in Treasury markets.

“Treasury bonds have not been a great investment,” the Bridgewater Associates founder said Tuesday at the Greenwich Economic Forum. “We have an interest rate risk in that bond market.”

Yields have risen after a healthy decline and for now, this indicates the bond market is pricing in fewer rate cuts and not more, according to Michael Landsberg at Landsberg Bennett Private Wealth Management.

“Yields will likely stay range bound and even if they rise from here, they have plenty of upside room before rising yields start to negatively affect stock prices,” he said.

Corporate Highlights:

• Boeing Co. managed to hand over 33 aircraft to customers in September, when a strike shut down large parts of its manufacturing, while warning that the work stoppage at its main production hub in the Seattle area will reduce future deliveries.
• The US Federal Aviation Administration warned operators of certain Boeing 737 aircraft that the rudder system could possibly jam due to a faulty part.

Key events this week:

• Fed minutes, Wednesday
• Fed’s Lorie Logan, Raphael Bostic, Austan Goolsbee and Mary Daly speak, Wednesday
• US CPI, initial jobless claims, Thursday
• Fed’s John Williams and Thomas Barkin speak, Thursday
• JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
• US PPI, University of Michigan consumer sentiment, Friday
• Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.6%
• The Dow Jones Industrial Average rose 0.3%
• The MSCI World Index rose 0.4%
• Bloomberg Magnificent 7 Total Return Index rose 1.7%
• The Russell 2000 Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0978
• The British pound rose 0.1% to $1.3099
• The Japanese yen was little changed at 148.30 per dollar

Cryptocurrencies

• Bitcoin fell 1.4% to $62,114.69
• Ether fell 0.3% to $2,434.47

Bonds

• The yield on 10-year Treasuries was little changed at 4.02%
• Germany’s 10-year yield declined one basis point to 2.24%
• Britain’s 10-year yield declined two basis points to 4.18%

Commodities

• West Texas Intermediate crude fell 4.6% to $73.57 a barrel
• Spot gold fell 0.8% to $2,621.72 an ounce

This story was produced with the assistance of Bloomberg Automation.

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