US Stocks Rally Loses Steam Ahead of Powell Speech: Markets Wrap

(Bloomberg) — US stocks and bonds wavered on Monday as traders awaited remarks from the Federal Reserve Chair later in the session. 

S&P 500 was little changed with declines in Amazon.com Inc. and Nvidia Corp. weighing on the benchmark index. Despite Monday’s weakness, a record-setting rally has put the equities gauge on track for its fourth consecutive quarter of gains — the longest such winning stretch since 2021.  

Treasury yields climbed, led by the policy-sensitive two-year note while the dollar eked out steadied. 

Investors will also be tuning in for remarks by Fed Chair Jerome Powell on Monday when he takes the stage at a National Association for Business Economics conference.  

“Powell won’t end the 25 bp versus 50 bp debate this afternoon. Or at least it is very unlikely,” according to BMO’s Ian Lyngen. Friday’s employment report is the main event this week, he noted, adding Tuesday’s JOLTS figures from August “should reinforce the idea that a cooling labor market has become the new norm.”

To Goldman Sachs Group Inc. strategists led by David Kostin, a strong print Friday may help fuel risk-on bets and embolden investors to move “out of expensive ‘quality’ stocks into less-loved lower quality firms.”

As investors gauge the outlook for Fed rate cuts, investors must ponder a cocktail of risks, including rising tensions in the Middle East. The relentless rally in stocks will also be tested by third-quarter corporate results set to kick off in mid-October.

“The bull market has survived the year’s historically weakest quarter, the third quarter, and it is likely to remain intact through at least the end of the year, as earnings remain strong, interest rates are moving lower and consumers are still spending,” said Emily Bowersock Hill at Bowersock Capital Partners.

“We expect the fourth quarter to be quite similar to the third quarter – elevated volatility, but with a strong finish,” she added. 

European stocks dropped some 1% after Jeep maker Stellantis NV cut its profit margin forecast. On Friday, Volkswagen AG had issued its second profit warning in three months. Ford Motor Co. and General Motors Co. slumped in US trading.

That was in contrast to the mood in China, where the CSI 300 Index jumped as much as 9.1%, the most since 2008, fueled by the stimulus package. The policy steps also buoyed European mining and luxury stocks. 

Corporate Highlights

• Verizon Communications Inc., the biggest wireless carrier in the US, has agreed to sell thousands of mobile phone towers to digital infrastructure firm Vertical Bridge.
• DirecTV and Dish have agreed to combine in a deal that will create the biggest pay-TV provider in the US.
• REA Group Ltd. walked away from its pursuit of Rightmove Plc after being repeatedly rejected by the UK property portal.

Key events this week: 

• Fed Chair Jerome Powell delivers speech at National Association for Business Economics conference in Nashville on Monday
• Bank of England policy maker Megan Greene joins panel at NABE to discuss global monetary policy on Monday
• Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins attend conference on Tuesday
• ECB policy makers speaking at various locations include Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel on Tuesday
• BOE chief economist Huw Pill speaks at Confederation of British Industry economic growth board on Tuesday
• Bank of Japan issues summary of opinions for September on Tuesday
• South Korea CPI, S&P Global Manufacturing PMI on Wednesday
• Fed speakers include Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem and Fed Governor Michelle Bowman on Wednesday
• US nonfarm payrolls, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 11:16 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average fell 0.1%
• The Stoxx Europe 600 fell 0.9%
• The MSCI World Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1157
• The British pound rose 0.3% to $1.3411
• The Japanese yen fell 0.7% to 143.19 per dollar

Cryptocurrencies

• Bitcoin fell 2.9% to $63,895.93
• Ether fell 1.6% to $2,620.28

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.77%
• Germany’s 10-year yield was little changed at 2.12%
• Britain’s 10-year yield advanced three basis points to 4.00%

Commodities

• West Texas Intermediate crude rose 0.9% to $68.82 a barrel
• Spot gold fell 0.9% to $2,634.32 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Catherine Bosley, Sagarika Jaisinghani, Kit Rees and Margaryta Kirakosian.

©2024 Bloomberg L.P.