Stocks rise on ‘moderate’ economic signals: Markets wrap

Stocks rise on ‘moderate’ economic signals: Markets wrap

(Bloomberg) — Stocks extended their November gains amid speculation that the Federal Reserve will be able to deliver a soft landing as the U.S. economy remains fairly resilient and inflation shows signs of slowing.

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The S&P 500 reached the 4,500 level — although the advance was far less than Tuesday’s rally that was spurred by short covering and bets that the Fed’s tightening cycle was over. Shares of Target Corp. rose. The big-box retailer was buoyed by strong earnings, while Nvidia Corp fell after a 10-day winning streak. Treasuries halted a rally that put global bonds on the verge of erasing their losses in 2023, as interest rate traders reloaded their short bets.

Wall Street waded through a raft of economic data looking for clues about expectations of the Fed’s next steps. Retail sales slowed in October and previous months were revised higher – indicating some resilience heading into the holiday season. Prices paid to US producers unexpectedly fell by the most since April 2020.

“We got more moderates today,” said David Russell, global head of market strategy at TradeStation. “Price growth is moderate, but with strong demand on the margin. A soft landing is taking shape.”

According to Anthony Saglimbini of Ameriprise Financial, there is a “well-established trend of lower inflation,” and stocks are reacting positively to that because it likely means the Fed is done raising interest rates.

Read: Wall Street bears file as inflation slows triggers strong turnaround

Investors shouldn’t be too distracted by the decline in overall retail sales — oil prices weigh heavily on the number, and the cost of gas fell significantly last month, according to eToro’s Callie Cox.

“We are in a bull market until there are signs of a recession, and that has not happened yet,” Cox noted. “Spending is strong and inflation is under control. As the past few weeks have shown us, it is important that we continue to invest.

Overall, the latest economic reports suggest that inflationary pressures are largely weak and that consumer spending is “moving quickly,” said Will Cumbernall of FHN Financial. He noted that growth remains strong, and the Fed could leave interest rates unchanged in December.

Read: Invesco Says Enjoy Spoils of Market Momentum: Watch

Given consumer strength, it’s reasonable to assume corporate profits will continue to grow, adding to the year-end rally, according to Chris Zaccarelli of the Alliance of Independent Advisors.

“We have continued to hold long-term equities, despite the recent pullback — and have added duration in fixed income since Treasuries reached 5%, and we believe the year-end rally will expand,” he noted.

For Jim Baird of financial advisory firm Plante Moran, while the economy is not out of the woods, there is a potential path to a soft landing.

Read: Credit market melting paves the way for M&A debt deals

The S&P 500 has seen a trendline breakout over the past few sessions, and this could “lead to a retest of the 2023 highs inside the low +4600 area,” said Dan Wantrobsky of Janey Montgomery Scott.

“Keep in mind that the index is now pressing towards the overbought zone and is therefore likely to see some profit taking/consolidation going forward,” he noted.

David Kostin of Goldman Sachs Group Inc. Wall Street’s latest strategist issues a bullish call. He wrote that a supportive mix of factors awaits US stocks, with the economy poised to avoid a recession, earnings rising and valuations remaining steady.

“This time next year, portfolio managers will look back and realize that the best investment strategy for 2024 was to follow Taylor Swift’s advice in the song from her 1989 album: ‘All You Gotta Do Is Survive’ – Invest,” Costin said. “The song reflects our fundamental expectation that despite choppy volatility, fund managers will ultimately be rewarded for continuing to invest until the end of next year.”

Meanwhile, the bond market is at risk of leaning too heavily toward interest rate cuts next year because “the inflation problem is far from being solved,” according to Daniel Ivaskin, chief investment officer at Pacific Investment Management.

T. Rowe Price says that bets on lower interest rates next year are exaggerated, and he expects growth in the United States and higher interest rates against other major economies to support the dollar. Meanwhile, Western Asset Management says demand for Treasuries and the dollar’s status as the world’s reserve currency will bolster American exceptionalism.

The most prominent features of the company:

  • Goodyear Tire and Rubber Co said it will search for a new chief executive, cut costs and weigh options for several business lines as part of a sweeping overhaul under pressure from activist Elliott Investment Management.

  • ValueAct Capital has built a stake in Walt Disney Co., a person familiar with the matter said, adding more activist pressure on the U.S. media and entertainment giant as it grapples with historic shifts in its industry.

  • Advance Auto Parts Inc. reduced its… Its earnings guidance for this year.

  • JD.com Inc. registered Stronger-than-expected rise in quarterly revenue, after heavy promotional spending drove online transactions in the face of stiff competition.

  • SpaceX is discussing an initial public offering for its fast-growing Starlink space business in late 2024, people familiar with the matter said, in an effort to capitalize on strong demand for space communications.

  • Sanofi is working with an adviser to begin preparations for the planned spinoff of its consumer health division, people familiar with the matter said.

  • Alstom SA, a train maker, flagged a potential stock gain alongside job cuts and asset sales to help shore up its balance sheet.

Main events this week:

  • New home prices in China, Thursday

  • US Initial Jobless Claims, Industrial Production, Thursday

  • Walmart earnings, Thursday

  • Cleveland Fed President Loretta Mester, New York Fed President John Williams and Fed Vice Chairman for Supervision Michael Barr speak Thursday.

  • Bank of England Deputy Governor Dave Ramsden and European Central Bank President Christine Lagarde speak at the event on Thursday

  • Housing starts in the US on Friday

  • The US Congress faces a midnight deadline to pass the federal spending measure on Friday

  • European Central Bank President Christine Lagarde speaks on Friday

  • Chicago Fed President Austin Goolsbee, Boston Fed President Susan Collins and San Francisco Fed President Mary Daly speak Friday.

Some key movements in the markets:

Stores

  • The S&P 500 rose 0.2% as of 1:02 PM New York time

  • The Nasdaq 100 was little changed

  • The Dow Jones Industrial Average rose 0.3%

  • MSCI World Index rose 0.6%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.2 percent to $1.0853

  • The British pound fell 0.6 percent to $1.2421

  • The Japanese yen fell 0.5 percent to 151.16 yen to the dollar

Digital currencies

  • Bitcoin rose 2.5% to $36,483.19

  • Ethereum rose 1.5% to $2,011.57

Bonds

  • The yield on 10-year Treasury bonds rose nine basis points to 4.54%.

  • The yield on 10-year German bonds rose four basis points to 2.64%.

  • The yield on British 10-year bonds rose eight basis points to 4.23%.

Goods

  • West Texas Intermediate crude fell 1.3% to $77.24 a barrel

  • Gold fell in spot transactions by 0.1 percent to $1,961.63 per ounce

This story was produced with assistance from Bloomberg Automation.

–With assistance from Emily Graffeo, Garfield Reynolds, Ruth Carson, and Isha Dey.

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