Treasury Rally Stalls at Start of Data-Packed Week: Markets Wrap

(Bloomberg) — The world’s biggest bond market got hit while stocks saw mild gains as traders braced for a barrage of economic data and remarks from Federal Reserve speakers that will help shape the outlook for interest rates.

Treasuries dropped across the US curve, with a heavy slate of corporate bond offerings also considered a factor behind the weakness. With no US auctions slated until Dec. 10, focus is on the first major indicators for November. Before Friday’s jobs report, data showed US manufacturing activity shrank by less than forecast. Fed officials including Jerome Powell are due to speak in coming days as a Dec. 18 rate cut is only about half priced into swaps.

“This week will be dominated by Fedspeak and the employment numbers,” said Andrew Brenner at NatAlliance Securities. “There is no way there won’t be a big move off the payroll numbers. We do know that the Fed has prioritized employment over inflation in their dual mandate with all their speeches, Powell in particular, focusing on employment deterioration versus a mild uptick in inflation.”

Treasury 10-year yields advanced one basis point to 4.18%. The dollar snapped a three-day losing streak amid a currency warning to BRICS nations by President-elect Donald Trump. French bonds and stocks came under renewed pressure after Marine Le Pen’s party said they would support a no-confidence vote in Prime Minister Michel Barnier’s government.

The S&P 500 added 0.2%. The Nasdaq 100 rose 0.9%. The Dow Jones Industrial Average fell 0.2%. Intel Corp. climbed as chief Pat Gelsinger is leaving the job after the chipmaker’s turnaround sputtered. Tesla Inc. rallied on bullish analyst comments. Apple Inc. hit an all-time high.

Small- and mid-cap stocks have the potential to deliver double-digit gains next year under a best-case scenario, although “a lot can go wrong,” according to JPMorgan Chase & Co. strategists including Eduardo Lecubarri.

The group is heavily under-owned after three years of record cumulative outflows, while valuations show an above-average discount to large caps, they wrote. The relative fundamental picture for small- and mid-caps no longer faces headwinds such as rising rates and wages. The strategists also noted that Donald Trump’s election victory also serves as a catalyst as investors are likely to prefer domestic exposure.

Corporate Highlights:

• Super Micro Computer Inc. said an independent review of its business found no evidence of misconduct but recommended that the server maker appoint new top financial and legal leadership.
• MicroStrategy Inc. bought another $1.5 billion in Bitcoin, the fourth consecutive weekly purchase announced by the crypto hedge fund proxy.
• Cloudflare Inc. was upgraded by Morgan Stanley, which said the software maker can “sustain, if not accelerate, topline growth over the next few years.”
• Core Scientific Inc. intends to offer $500 million in convertible notes via a private offering.
• Gap Inc. was upgraded at JPMorgan Chase & Co., which said the foundation has been set to support a “consistent playbook of improved merchandising and marketing.”
• Roughly 66,000 Volkswagen AG workers across Germany abandoned their posts on Monday, the first wave of temporary walkouts triggered by a stalemate over how to slash costs at the carmaker’s namesake brand.
• Stellantis NV Chief Executive Officer Carlos Tavares’s surprise departure leaves the maker of Jeep SUVs and Peugeot cars without clear leadership at a time of significant upheaval in the industry.
• Toast Inc. was downgraded at Goldman Sachs Group Inc., which cited an elevated valuation following a recent rally.
• Upstart Holdings Inc. was downgraded at JPMorgan Chase & Co., a move that’s based on valuation as shares appear to be “priced for perfection.”

Key events this week:

• Fed’s Adriana Kugler and Austan Goolsbee speak, Tuesday
• Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
• US factory orders, US durable goods, Wednesday
• Fed’s Jerome Powell and Alberto Musalem speak, Wednesday
• Fed’s Beige Book, Wednesday
• Eurozone retail sales, Thursday
• US initial jobless claims, Thursday
• Eurozone GDP, Friday
• US jobs report, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 11:31 a.m. New York time
• The Nasdaq 100 rose 0.9%
• The Dow Jones Industrial Average fell 0.2%
• The Stoxx Europe 600 rose 0.6%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.6%
• The euro fell 0.9% to $1.0487
• The British pound fell 0.7% to $1.2642
• The Japanese yen rose 0.4% to 149.15 per dollar

Cryptocurrencies

• Bitcoin fell 1.1% to $96,787.17
• Ether fell 1.6% to $3,649.04

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.18%
• Germany’s 10-year yield declined five basis points to 2.04%
• Britain’s 10-year yield declined three basis points to 4.21%

Commodities

• West Texas Intermediate crude rose 0.2% to $68.14 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.

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