(Bloomberg) — A relentless rally in stock prices took a lull on Monday as traders awaited this week’s round of jobs data and comments from Federal Reserve officials for clues about the outlook for interest rates.
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Stocks fluctuated after the S&P 500 index hit a record high for the 15th time this year. While the market is ignoring concerns about a peak, warnings of a decline or decline in stock prices have also surfaced. Treasury prices have fallen, with syndicate desks seeking to sell about $30 billion of new high-grade bonds this week.
Fed Chairman Jerome Powell is expected to further reinforce his message that there is no rush to cut interest rates in speeches on Wednesday and Thursday. Meanwhile, statistics are expected to show a cooling in the labor market, increasing the outlook for policy easing as early as June.
“If the S&P 500 is going to hit record highs for the eighth consecutive week, it will probably need to hear some encouraging words from Chairman Powell on rate cuts in two days of Congressional testimony and avoid any big surprises from the government.”Employments data,” said Chris Larkin of Morgan Stanley’s E*Trade.
The S&P 500 index is hovering around 5,130. Tesla fell 7%. Nvidia has overtaken Saudi Aramco to become the third-largest listed company by market capitalization. Super Micro Computer, which joins the U.S. stock benchmark this month, has soared more than 1,000% in the past 12 months. New York Community Bancorp fell after Friday’s credit rating downgrade.
The yield on the US 10-year Treasury note rose 4 basis points to 4.22%. Bitcoin traded above $66,000. Gold exceeded $2,100.
The S&P 500 index posted its 16th weekly gain in the past 18 years, which hasn’t happened since 1971, according to Deutsche Bank. If the index reaches 17 out of 19 this week, it would be the first time since the 1960s, the company noted.
“A wide variety of risk assets are breaking through incredible levels,” said Matt Maley of Miller Tabak. “Some of these are justified, but others are ‘foam’ symptoms. This means the stock market is becoming more risky, and investors need to avoid becoming too complacent. ”
Marko Kolanovic of JPMorgan Chase & Co. also sees signs of “foam” building up in the market.
“This could keep monetary policy at a high level for an extended period of time, as a premature rate cut risks triggering further increases in asset prices and further increases in inflation,” he said.
The U.S. stock market is likely to rise until economic data signals a significant slowdown ahead or inflation appears sticky enough to prevent the Fed from cutting rates deep and quickly, according to Wolf Research’s Chris Seniek. is said to be high.
“The market’s relentless rise raises the question of accepting even marginally bullish news and ignoring bad news (known as a ‘Teflon’ market because nothing sticks to it), causing the stock market to fall.” Are there any contributing factors?” Sevens Report founder Tom Essay said.
“Of course, the answer is yes.”
He added that slowing growth, waning expectations for interest rate cuts and lower profit expectations could be contributing factors.
Economist Nouriel Roubini, known for his bearish outlook ahead of the 2008 global financial crisis, expressed optimism that U.S. growth will remain strong this year. However, that may be negative for stocks.
Roubini told Bloomberg Surveillance that “there is a serious possibility that there is a real possibility of what people call a ‘no-landing’, where growth exceeds potential and inflation remains high.” Ta. “Paradoxically, good news on growth may turn out to be bad news for markets if the Fed signals it won’t cut rates as quickly as people expect.”
Atlanta Fed President Rafael Bostic said the Fed’s first rate cut for the third quarter will be paused at its next meeting to assess how the policy shift will affect the economy. He said he expected that.
Mr. Powell headed to the Capitol for his semi-annual testimony. It comes two years after the central bank began an aggressive fight against soaring inflation. With the economy doing well and inflation inching toward the Fed’s sweet spot, Powell will make the case for why officials are in no rush to cut rates.
Fed officials, in their latest quarterly outlook released in December, said they expect rates to be cut by three quarter points this year, and bond markets are weighing this view based on the price of swap contracts that reference future Fed meeting dates. I accept it.
Steve Bartolini, a portfolio manager at T. Rowe Price Group, said, “If Chairman Powell says something to the effect that a rate cut will occur in the second half of this year, it could prompt a move to factor in two rate cuts. There is,” he said.
Bets on interest rate cuts and excitement about artificial intelligence fueled a fourth straight month of gains in the stock market, defying repeated concerns that the market, which has risen about 35% since the start of last year, has hit a ceiling.
The gains are prompting strategists to raise their targets for the end of 2024.
Bank of America’s Savita Subramanian is the latest to raise the S&P 500’s target to Wall Street’s highest.
She now expects the benchmark to reach 5,400 by the end of the year, compared to her previous target of 5,000. He said indicators are flashing bullish signals pointing to strong earnings growth and “amazing” margin resilience going forward.
Goldman Sachs Group Inc. strategists say the S&P 500’s rise to record highs is fueled by the rise of a small number of tech stocks and bears no resemblance to past bubbles.
Stocks with an enterprise value-to-sales ratio of more than 10 account for 24% of U.S. stock market capitalization, compared to 28% in 2021 and 35% during the tech bubble, writes strategist David Kostin. However, the number of stocks trading at that multiple is down significantly from its peak in 2021, and the range of “extreme valuations” is much more subdued, he added.
“This time it’s different,” Kostin said. “Unlike the widespread ‘growth at all costs’ of 2021, investors are primarily paying high valuations for the largest growth stocks in the index. We believe it is supported by the fundamentals.”
Company highlights:
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Apple was fined 1.8 billion euros ($2 billion) by the European Union on Monday over an investigation into its alleged banning of music streaming rivals, including Spotify Technology Inc., from its platform.
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American Airlines Group has agreed to buy 260 short-haul aircraft, including a huge contract for Boeing Co.’s 737 Max jets. This is a major boost for the company as it weathers a crisis of confidence following a near-catastrophic accident in January.
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Coinbase Global, the largest U.S. cryptocurrency exchange, said some individual investors had their account balances reduced to zero for the second time in less than a week.
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JetBlue Airways has officially abandoned its pursuit of Spirit Airlines, more than a month after a federal judge blocked its $3.8 billion acquisition on antitrust grounds.
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Arkhouse Management and Brigade Capital Management raised their offers for Macy’s by 14% after the retailer rejected an earlier offer.
This week’s main events:
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Bank of Japan Governor Kazuo Ueda speaks on Tuesday
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China Caixin releases PMI on Tuesday
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China opens the 14th National People’s Congress on Tuesday
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Eurozone S&P Global Services PMI, PPI, Tuesday
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US Factory Orders, ISM Services, S&P Global Services PMI, Tuesday
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Super Tuesday will be held in the United States, with Republican and Democratic primaries being held in more than a dozen states: North Carolina, California, Texas, and Oklahoma.
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Canadian interest rate decision Wednesday
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Eurozone retail sales Wednesday
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US ADP Employment, JOLTS Jobs, Wednesday
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Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee on Wednesday
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Fed issues beige book on Wednesday
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Fed’s Neel Kashkari (Minneapolis) and Mary Daley (San Francisco) speak Wednesday
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China trade, foreign exchange reserves, Thursday
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European Central Bank interest rate decision Thursday
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U.S. new jobless claims, trade, Thursday
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President Joe Biden delivers State of the Union address on Thursday
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Federal Reserve Chairman Jerome Powell testifies before the Senate Banking Committee on Thursday
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Cleveland Fed President Loretta Mester speaks Thursday
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Eurozone GDP, Friday
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US nonfarm payrolls, unemployment rate, Friday
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New York Fed President John Williams speaks on Friday
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ECB Executive Board Member Robert Holzmann speaks on Friday
The main movements in the market are:
stock
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The S&P 500 was little changed as of 2:09 p.m. New York time.
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Nasdaq 100 fell 0.2%
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The Dow Jones Industrial Average fell 0.3%.
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MSCI World Index little changed
currency
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Bloomberg Dollar Spot Index little changed
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The euro rose 0.2% to $1.0857.
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Sterling rose 0.3% to $1.2691.
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The Japanese yen fell 0.3% to 150.54 yen to the dollar.
cryptocurrency
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Bitcoin rises 6% to $66,620.02
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Ether rose 3.5% to $3,598.96
bond
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The 10-year Treasury yield rose 4 basis points to 4.22%.
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Germany’s 10-year bond yield fell 2 basis points to 2.39%.
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UK 10-year bond yield remains unchanged at 4.12%
merchandise
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West Texas Intermediate crude oil fell 1.6% to $78.66 per barrel.
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Spot gold rose 1.5% to $2,114.32 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Michael Mackenzie, Elizabeth Stanton, and Esha Dey.
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