(Bloomberg) — The stock market experienced a slight gain in the final minutes of US trading, despite Federal Reserve Chair Jerome Powell’s indication that there is no rush for additional interest-rate cuts.
In his statement, Powell mentioned that the central bank will gradually lower interest rates, while emphasizing that the overall economy remains stable. The S&P 500 closed the third quarter with a significant rally of over $2.5 trillion, disregarding Powell’s cautious tone.
Even though there was some weakness earlier in the day, the S&P 500 managed to secure its fourth consecutive quarter of gains, marking the longest winning streak since 2021. The Nasdaq 100 also saw a similar performance.
Emily Bowersock Hill of Bowersock Capital Partners stated, “The bull market has survived the historically weakest quarter of the year, the third quarter, and is likely to continue strong until the end of the year, supported by strong earnings, declining interest rates, and ongoing consumer spending.”
Looking ahead to the fourth quarter, Hill added, “We anticipate that the fourth quarter will be similar to the third quarter – characterized by heightened volatility but ultimately ending on a strong note.”
Following Powell’s remarks, the bond market saw a slight decline in its historic gains. Treasury yields increased, particularly the two-year note which traded around 3.64% after Powell’s comments on the November meeting data.
Despite this, Treasury debt still managed to yield a return of 1.4% through the month of September, as shown by the Bloomberg US Treasury Total Return Index. If this trend continues, it will mark the longest streak of monthly gains for the market since 2010.
Vital Knowledge’s Adam Crisafulli noted, “Powell’s comments were slightly hawkish, but the Fed still has room for more rate cuts.” He suggested that the markets should consider a half-point cut rather than three-quarters of a point for the remainder of the year.
Additionally, swaps traders adjusted their rate cut predictions, moving away from a three-quarter point cut before the US market opened.
Ian Lyngen of BMO mentioned in a note before the meeting, “Powell is unlikely to settle the 25 bp versus 50 bp debate this afternoon.” He highlighted that Friday’s employment report will be a significant event this week, with Tuesday’s JOLTS figures from August reinforcing the idea of a cooling labor market becoming the new norm.
As investors assess the prospects of Fed rate cuts, they must navigate through a mix of risks, including escalating tensions in the Middle East and the looming threat of a dockworkers’ strike in crucial US ports on Tuesday.
Chicago Fed President Austan Goolsbee expressed concerns about a supply shock if the strike persists, warning that it could increase business costs and lead to shortages.
Meanwhile, Raphael Bostic of the Atlanta Fed indicated to Reuters that he is open to another half-point policy easing at the central bank’s November meeting if upcoming data suggests slower-than-expected job growth.
Goldman Sachs Group Inc. strategists, led by David Kostin, believe that a strong employment report on Friday could drive risk-on investments and encourage investors to shift from expensive ‘quality’ stocks to less popular lower-quality firms.
In contrast, European stocks fell by around 1% following Jeep maker Stellantis NV’s downward revision of its profit margin forecast. Volkswagen AG had issued its second profit warning in three months on Friday, while Ford Motor Co. and General Motors Co. saw declines in US trading.
On a different note, the CSI 300 Index in China surged by as much as 9.1%, marking its biggest increase since 2008, driven by a stimulus package.
Corporate Highlights
-
Verizon Communications Inc., the largest wireless carrier in the US, has agreed to sell thousands of mobile phone towers to digital infrastructure firm Vertical Bridge.
-
DirecTV and Dish have reached a deal to merge, creating the largest pay-TV provider in the US.
-
REA Group Ltd. has abandoned its pursuit of Rightmove Plc after facing repeated rejections from the UK property portal.
Key events this week:
-
Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin, and Boston Fed President Susan Collins will attend a conference on Tuesday.
-
ECB policy makers including Olli Rehn, Luis de Guindos, Isabel Schnabel, and Joachim Nagel will be speaking at various locations on Tuesday.
-
BOE chief economist Huw Pill will speak at the Confederation of British Industry economic growth board on Tuesday.
-
Bank of Japan will publish a summary of opinions for September on Tuesday.
-
South Korea CPI and S&P Global Manufacturing PMI will be released on Wednesday.
-
Fed speakers including Richmond’s Thomas Barkin, Cleveland’s Beth Hammack, St. Louis’s Alberto Musalem, and Fed Governor Michelle Bowman will speak on Wednesday.
-
US nonfarm payrolls report will be released on Friday.
Market Summary:
Stocks
-
The S&P 500 increased by 0.4% as of 4:02 p.m. New York time.
-
The Nasdaq 100 rose by 0.3%.
-
The Dow Jones Industrial Average remained relatively unchanged.
-
The MSCI World Index fell by 0.2%.
Currencies
-
The Bloomberg Dollar Spot Index rose by 0.3%.
-
The euro fell to $1.1133, a decrease of 0.3%.
-
The British pound remained steady at $1.3371.
-
The Japanese yen fell by 1% to 143.68 per dollar.
Cryptocurrencies
-
Bitcoin dropped by 3.5% to $63,554.51.
-
Ether decreased by 2.4% to $2,598.86.
Bonds
-
The yield on 10-year Treasuries increased by four basis points to 3.79%.
-
Germany’s 10-year yield declined by one basis point to 2.12%.
-
Britain’s 10-year yield rose by three basis points to 4.00%.
Commodities
-
West Texas Intermediate crude remained relatively stable.
-
Spot gold fell by 1% to $2,631.75 per ounce.
This article was created with the help of Bloomberg Automation.
–With contributions from Michael Mackenzie, Sagarika Jaisinghani, Kit Rees, Margaryta Kirakosian, and Catherine Bosley.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.