(Bloomberg) — Wall Street traders are eagerly awaiting key inflation data as stocks reach new all-time highs. Treasuries are down while the dollar is experiencing its longest winning streak in over two years.
On the eve of an expected report showing a continued moderation in consumer prices, the S&P 500 is nearing 5,800. The index reached its 44th record in 2024, with tech stocks leading the way once again. Apple Inc. saw a 1.7% increase in its stock price. Nvidia Corp. ended a five-day rally. Tesla Inc. saw a slight decline ahead of the Robotaxi launch. Alphabet Inc. dropped by 1.5% following news that the US is considering breaking up Google in a major big-tech antitrust case.
Major tech stocks have been experiencing volatility recently, but Solita Marcelli, Chief Investment Officer Americas at UBS Global Wealth Management, believes that weakness presents a good buying opportunity. She stated, “We remain positive on the tech sector and the outlook for artificial intelligence. Against this backdrop, we believe that volatility should be used to build long-term AI exposure.”
The market showed little reaction after the release of the latest Federal Reserve meeting minutes, which revealed that Jerome Powell faced some resistance to a half-point rate cut in September, as some officials preferred a smaller reduction.
David Russell at TradeStation commented, “Today’s Fed minutes were pretty ‘ho-hum,’ which could actually be a good thing for stock investors. Policymakers agree that inflation is fading and they see potential weakness in job growth. This keeps rate cuts on the table if necessary. The bottom line is that Powell might have the market’s back going into the end of the year.”
The S&P 500 rose by 0.7%, the Nasdaq 100 went up by 0.8%, and the Dow Jones Industrial Average climbed by 1%.
The yield on 10-year Treasuries increased by five basis points to 4.06%. The Bloomberg Dollar Spot Index rose by 0.4%, marking its eighth consecutive session of gains. Oil prices remained steady as US crude inventories grew, and traders kept an eye on China’s fiscal policy plans.
US inflation is expected to have moderated at the end of the third quarter, which is reassuring to a Federal Reserve that is shifting its focus towards protecting the labor market.
The consumer price index is projected to rise by 0.1% in September, the smallest gain in three months. Year-on-year, the CPI is expected to have risen by 2.3%, marking the sixth consecutive slowdown and the lowest level since early 2021. The index excluding food and energy categories, which gives a better view of underlying inflation, is forecasted to increase by 0.2% from the previous month and by 3.2% from September 2023.
“The Fed’s decision to shift its focus from inflation to the labor market means that inflation data, including tomorrow’s CPI, is likely to become less market-moving than it had been,” said Matthew Weller at Forex.com and City Index. “Despite that logical observation, this month’s CPI report may still drive market volatility coming on the back of Friday’s stellar jobs report, a reading that hints at the potential for renewed upside risks to inflation.”
A survey conducted by 22V Research shows that 42% of investors anticipate a “mixed/negligible” market reaction to the CPI, 32% expect a “risk-off” scenario, and only 25% predict a “risk-on” outcome.
“There is general optimism regarding inflation,” said Dennis DeBusschere, founder of 22V. He also mentioned that the percentage of investors expecting a recession has decreased, while those believing that financial conditions need to tighten have reached the highest level since June.
For the stock market’s bull run to continue, inflation must keep decreasing, the economy needs to experience a soft landing, and Corporate America’s earnings growth must remain robust and inclusive, according to Ed Clissold at Ned Davis Research.
As the two-year anniversary of the bull market approaches, a crucial element that has been missing from the current rally for much of the past few years — broader breadth — could fuel the next phase of share gains.
Clissold noted that large caps and growth stocks have historically outperformed in the third year of a bull market, but they are currently overbought compared to small-cap companies and value equities.
Meanwhile, billionaire investor Bill Gross believes that the rally that has nearly doubled US stock values over the past five years is slowing down, and investors should expect low but positive returns on their investments.
He recommends maintaining average exposure to the stock market while focusing more on defensive stocks with a minor allocation to bonds.
“No bear market, but it’s not the same bull market anymore,” wrote Gross, the co-founder and former chief investment officer of Pacific Investment Management Co.
Corporate Highlights:
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Tesla Inc. experienced its best quarter ever for shipments in China, with deliveries from its Shanghai factory increasing for the third consecutive month.
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Taiwan Semiconductor Manufacturing Co. reported a 39% increase in quarterly revenue, surpassing expectations and alleviating concerns about a slowdown in AI hardware spending.
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Rio Tinto Group has agreed to acquire Arcadium Lithium Plc in an all-cash deal worth $6.7 billion, expanding its presence in the battery metal sector and making its largest deal in 17 years.
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B. Riley Financial Inc.’s lenders will now have more oversight over the company’s finances, receiving weekly updates on its liquidity and some of its dealmaking as part of efforts to turn around the investment firm, which has been losing money.
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Generac Holdings Inc. is facing a shortage of portable backup generators following Hurricane Helene and other recent storms that left millions of Americans without power.
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GSK Plc announced that it will pay up to $2.2 billion to settle about 80,000 US court cases related to allegations that its former reflux medication Zantac was contaminated with a potential carcinogen.
Key events this week:
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US CPI, initial jobless claims, Thursday
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Fed’s John Williams and Thomas Barkin speak, Thursday
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JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
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US PPI, University of Michigan consumer sentiment, Friday
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Fed’s Lorie Logan, Austan Goolsbee, and Michelle Bowman speak, Friday
Some of the main movements in the markets:
Stocks
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The S&P 500 rose by 0.7% as of 4 p.m. New York time
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The Nasdaq 100 increased by 0.8%
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The Dow Jones Industrial Average climbed by 1%
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The MSCI World Index rose by 0.6%
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The Bloomberg Magnificent 7 Total Return Index remained relatively unchanged
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The Russell 2000 Index rose by 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose by 0.4%
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The euro fell by 0.4% to $1.0939
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The British pound dropped by 0.3% to $1.3065
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The Japanese yen decreased by 0.8% to 149.32 per dollar
Cryptocurrencies
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Bitcoin fell by 2.2% to $60,966.5
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Ether dropped by 1.1% to $2,415.64
Bonds
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The yield on 10-year Treasuries increased by five basis points to 4.06%
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Germany’s 10-year yield rose by one basis point to 2.26%
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Britain’s 10-year yield remained relatively unchanged at 4.18%
Commodities
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West Texas Intermediate crude dropped by 0.2% to $73.44 a barrel
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Spot gold fell by 0.5% to $2,609.26 an ounce
This article was created with the help of Bloomberg Automation.
–With assistance from Denitsa Tsekova.
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