Stocks Head for Third Week of Gains on Rate Bets: Markets Wrap

(Bloomberg) — US stocks are on track for their third consecutive week of gains — despite languishing on Friday — as investors were repeatedly reassured that the economy is cooling without falling off a cliff.

Treasuries rallied as fresh data on Friday cemented bets of further interest-rate cuts by the Federal Reserve.

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The S&P 500 struggled for direction for most of the session, oscillating between minor gains and losses. The Nasdaq 100 remained lower on Friday, dragged down by stocks like Nvidia Corp. The dollar is on pace for a fourth week of losses. Yields are lower across the curve, with the 10-year rate around 3.75%.

The Fed’s preferred gauge of underlying US inflation rose mildly in August, as did inflation-adjusted consumer spending. Those figures confirmed what traders already knew about the health of economy after parsing a slew of data earlier this week. A read on US consumer sentiment on Friday matched the optimism. 

Other catalysts this week included daily stimulus announcements from China that kept sentiment largely upbeat. Several central banks across the globe — in Switzerland, Mexico, Hungary and Czech Republic — also lowered interest rates this week. A key driver of markets later next week will be jobs data, which will provide further clues on the state of the labor market. 

Markets are still pricing in a split chance between a quarter point and half point cut at the Fed’s next meeting. Economists now see inflation reaching the US central bank’s 2% target next year. 

“Add today’s PCE price index to the list of economic data landing in a sweet spot,” said Chris Larkin, managing director, trading and investing, at E*Trade. “Inflation continues to keep its head down, and while economic growth may be slowing, there’s no indication it’s falling off a cliff.”

Damian McIntyre, a portfolio manager at Federated Hermes, said that while a soft landing for the economy is never guaranteed, investors should find solace in the strength of recent economic data.

“Today’s inflation print confirms what Jerome Powell told us last week: inflation is falling, the consumer is strong, and the labor market remains resilient,” he said.

Elsewhere, China’s CSI 300 Index concluded its best week since 2008. In Europe, stocks closed at a fresh all-time high on Friday, capping off their best week in more than four months.

Among commodities, oil rose after Israel said its military struck Hezbollah’s main headquarters in southern Beirut, ramping up tensions in the Middle East.

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 1:50 p.m. New York time
• The Nasdaq 100 fell 0.4%
• The Dow Jones Industrial Average rose 0.5%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro fell 0.1% to $1.1164
• The British pound fell 0.2% to $1.3384
• The Japanese yen rose 1.6% to 142.43 per dollar

Cryptocurrencies

• Bitcoin rose 1.8% to $65,861.41
• Ether rose 2.3% to $2,691.49

Bonds

• The yield on 10-year Treasuries declined five basis points to 3.75%
• Germany’s 10-year yield declined five basis points to 2.13%
• Britain’s 10-year yield declined three basis points to 3.98%

Commodities

• West Texas Intermediate crude was little changed
• Spot gold fell 1% to $2,646.53 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Divya Patil, Alex Nicholson, Sujata Rao, Margaryta Kirakosian and Edward Bolingbroke.

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