Stocks Rise as US Yields Halt Rise; Falling Oil: Market Recap

This content was published on September 7, 2022 – 15:33

(Bloomberg) – Stocks soared as Treasury yields halted a surge that took them to multi-year highs, while an oil selloff eased worries about further price pressures that could jeopardize the Federal Reserve’s war on inflation.

The S&P 500 rebounded from its lowest since mid-July, with all groups except energy advancing. In a presentation dubbed “Far Out,” Apple Inc. is set to unveil the iPhone 14 lineup, a new slate of smartwatches and new AirPods. West Texas Intermediate crude fell below $85 a barrel. A dollar gauge was little changed after a rally that shook currencies around the world and briefly drove gold below the $1,700 an ounce “danger zone”.

The pound slid to its weakest level in nearly four decades, weighed down by dire economic prospects. The Japanese yen has fallen to a new 24-year low against the greenback and speculation is rife about the prospects for direct intervention. The South Korean won weakened to levels not seen since 2009 and the Chinese yuan was a hair’s breadth away from breaching the psychological barrier 7.

In the final week before officials enter a blackout period ahead of the Fed’s Sept. 20-21 policy meeting, a wide range of central bankers will offer their views. Fed Bank of Cleveland Chair Loretta Mester warned against an early victory declaration on inflation, saying she would like to see several months of falling month-over-month readings before concluding. prices have peaked. The Beige Book expected at 2 p.m. Washington time will be dissected for signs of moderating economic momentum.

“Is there a light at the end of the tariff hike tunnel? said Alex Christensen, portfolio manager at Columbia Threadneedle. “That’s what many investors are asking in the wake of last month’s Fed symposium in Jackson Hole. And the answer to that question will depend on whether the Fed thinks it has done enough to bring inflation down.

Traders pushed the market’s implied odds of another three-quarter-point Fed rate hike in September — instead of a smaller half-point move — to the highest level since the last meeting. of the central bank. The peak was reached shortly after a Wall Street Journal article suggested the larger move looked likely. Although held only briefly, the swap contract rate referencing this month’s meeting remains about two basis points higher on the day.

Shares have fallen since mid-August amid an array of risks ranging from restrictive central banks to the energy crisis in Europe and an economic slowdown in China. The recent drop in the S&P 500 has reduced the rebound from June lows that a Goldman Sachs Group Inc. team led by Peter Oppenheimer described as a “bear market rally.” Strategists “expect further weakness and bumpy markets before a decisive bottom is established.”

Read: Burry of ‘Big Short’ fame says ‘No, we haven’t hit rock bottom yet’

“Economies around the world are slowing down, and it’s really not a market that says we’re on the verge of a dynamic rebound in equities,” Margaret Patel, senior portfolio manager at Allspring Global Investments, told Bloomberg. Television. “Earnings are going to slow down a lot. That says a lot of stocks could go down.

The weakening economy should favor the continued outperformance of so-called cheaper value stocks relative to their growth counterparts, said a separate Goldman note from strategists led by Cormac Conners.

“History shows that value stocks outperform at the start of recessions,” they wrote. Goldman economists forecast a one in three chance of a recession in the coming year.

Meanwhile, Wednesday’s oil slide was exacerbated by a bearish technical picture. The US oil benchmark has formed a so-called death cross for the first time since February 2020, a pattern in which the 50-day moving average falls below its 200-day marker. Such a crossover usually signals a loss of short-term momentum and further selling pressure, with prices remaining below their 50-, 100- and 200-day moving averages.

Elsewhere, wheat futures soared nearly 7% after Russian President Vladimir Putin criticized a recent grain deal with Ukraine, drawing attention to the Black Sea region’s selling prospects.

What to watch this week:

  • European Central Bank rate decision on Thursday
  • Fed Chairman Jerome Powell is due to speak on Thursday
  • Chicago Fed President Charles Evans and his Minneapolis counterpart Neel Kashkari are due to speak on Thursday
  • Extraordinary meeting of EU energy ministers on the emergency response to electricity markets, Friday

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Some of the major movements in the markets:

Shares

  • The S&P 500 rose 0.9% at 11:31 a.m. PT
  • The Nasdaq 100 rose 1%
  • The Dow Jones Industrial Average rose 0.8%
  • The Stoxx Europe 600 fell 0.4%
  • The MSCI World index rose 0.3%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro rose 0.4% to $0.9948
  • The British pound fell 0.4% to $1.1472
  • The Japanese yen fell 1.2% to 144.45 per dollar

Obligations

  • The yield on 10-year Treasury bills fell six basis points to 3.29%
  • Germany’s 10-year yield fell six basis points to 1.57%
  • The UK 10-year yield fell seven basis points to 3.03%

Goods

  • West Texas Intermediate crude fell 3.7% to $83.69 a barrel
  • Gold futures rose 0.5% to $1,721.40 an ounce

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