Stocks move away from session lows after selling: Markets wrap

(Bloomberg) — Stocks pared losses ahead of Friday’s jobs report, after defeating fears of a deeper recession amid bets that the Federal Reserve will keep interest rates higher for longer to tame inflation.

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The S&P 500 pared the slip that exceeded 1.5% amid gains in industrials and commodities, but still headed for its fourth straight decline. Big tech once again took a hit as Treasury yields soared. Apple Inc. shares fell. down 3% and Amazon.com Inc. fell. For the seventh consecutive day, the longest losing streak since August 2019. The pound fell after the Bank of England asked investors to rein in expectations of increases.

Swaps indicating future Fed meetings are up further, with the May and June 2023 contracts pointing to an expected peak rate of over 5.1% – after estimates briefly fell below 5% on Wednesday. The benchmark rate is currently in the range of 3.75% to 4%.

“Remember, ‘lower for longer’ in 2021 in terms of the interest rate environment? But higher,” wrote Matt Malley, chief market strategist at Miller Tabak + Co. “It may take longer for a short-term rate hike, but they are trending.” to a higher level than the markets were thinking.”

Traders also waded into a fresh batch of economic data, with U.S. service providers expanding in October at the slowest pace since May 2020 as demand growth and business activity eased. Applications for unemployment insurance last week fell slightly, and are hovering around historically low levels. The numbers reinforce what Federal Reserve Chairman Jerome Powell has described as an “overheated labor market”.

Friday’s report is also expected to show that the labor market is still too tight to satisfy the Fed.

While expectations are that payroll growth for October has slowed to 200,000, that increase will still be above the shy monthly pace of 100,000 that economists believe is neither too strong nor too weak for the economy in the long run.

“With Powell’s hawkish comments yesterday that disappointed some and upended the scenario in an initial rally, don’t be surprised to see more of the same volatility as investors digest the report and anticipate the Fed’s next steps,” said Mike Lowengart of Morgan Stanley Global Investments. Desk.

Read: Deeper US Recession Looms as Flexible Labor Market Stimulates Fed

Markets are more interested in the final level of rates than the pace of tightening, according to Mark Heffel, chief investment officer at UBS Global Wealth Management, who does not believe conditions are ripe for a sustained rally in stocks.

Hefele noted that “the Fed, along with other major central banks, is likely to continue tightening interest rates until the first quarter of 2023.” Economic growth is likely to continue to slow as the new year begins, and global financial markets are vulnerable to pressure while monetary policy continues to tighten. These headwinds were not fully reflected in earnings estimates or equity valuations.”

Meanwhile, European Central Bank President Christine Lagarde warned that a “moderate recession” is likely, but it will not be enough by itself to stop the price hike. The comments are part of a raft of public appearances by European Central Bank officials, as investors and analysts ponder the dual challenge of record price growth and potential economic deflation, largely due to Russia’s invasion of Ukraine.

In corporate news, Peloton Interactive Inc. gave a weaker estimate for the current quarter than Wall Street had expected, even as management announced that it was ahead of its schedule to turnaround the fitness company. Moderna’s earnings offered a preview of the future of Covid-19 vaccine sales, and so far it doesn’t look pretty. Qualcomm Inc. , the largest maker of smartphone processors, forecast weaker than expected.

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This week’s main events:

Some of the main movements in the markets:

Stores

  • The S&P 500 was down 0.5% as of 10:50 a.m. New York time

  • The Nasdaq 100 index fell 0.6%.

  • The Dow Jones Industrial Average fell 0.4%

  • The Stoxx Europe 600 Index is down 1.1%

  • The MSCI World Index fell 0.9%

coins

  • Bloomberg spot dollar index rose 0.4%

  • The euro fell 0.3 percent to $0.9791

  • The British pound fell 1.5 percent to $1.1216

  • The Japanese yen was little changed at 147.79 per dollar

Cryptocurrency

  • Bitcoin rose 0.8% to $2,0329.08

  • Ether rose 2.9% to $1,555.15

bonds

  • The 10-year Treasury yield advanced four basis points to 4.14%.

  • Germany’s 10-year yield offers 10 basis points to 2.24%

  • The UK 10-year bond yield advanced seven basis points to 3.47%.

goods

  • West Texas Intermediate crude fell 1.4 percent to $88.74 a barrel

  • Gold futures fell 1.2 percent to $1,630 an ounce

– With assistance from Vildana Hajric and Isabelle Lee.

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