The relentless rally in stocks took a breather on Monday, with traders awaiting this week’s batch of jobs data and remarks from Federal Reserve officials for clues on the interest-rate outlook.

Equities fluctuated after the S&P 500 saw its 15th record this year. While the market has defied concerns about a peak, warnings about a consolidation or a pullback have surfaced. Treasuries fell, with syndicate desks calling for around US$30 billion of new high-grade bond sales this week.

Speaking Wednesday and Thursday, Fed Chair Jerome Powell is expected to double down on his message that there’s no rush to cut rates. Meantime, data is forecast to show labor-market cooling, which would reinforce bets on policy easing as soon as June.

“If the S&P 500 is going to make this the eighth-straight week it hits an all-time high, it will likely need to hear encouraging words from Powell about rate cuts in his two days of congressional testimony, and avoid any major surprises from jobs data,” said Chris Larkin at E*Trade from Morgan Stanley.

The S&P 500 hovered near 5,130. Tesla Inc. sank 7 per cent. Nvidia Corp. overtook Saudi Aramco to become the third-most valuable public company. Super Micro Computer Inc., which will join the U.S. equity benchmark this month, has now surged over 1,000 per cent in the past 12 months. New York Community Bancorp slid after Friday’s credit downgrades. 

U.S. 10-year yields rose four basis points to 4.22 per cent. Bitcoin traded above $66,000. Gold topped $2,100.

The S&P 500 saw its 16th weekly gain in the last 18 — something that hasn’t happened since 1971, according to Deutsche Bank AG. If the gauge makes 17 out of 19 this week, it will be for the first time since 1960’s, the firm noted.

“We’re seeing some incredible levels being broken from many different risk assets,” said Matt Maley at Miller Tabak. “Some of this is justified, but others are a sign of ‘froth.’ This means that the risks are rising in the stock market, and thus investors need to avoid becoming too complacent.”

Marko Kolanovic at JPMorgan Chase & Co. also see signals of accumulating “froth” in the market.

“This may keep monetary policy higher for longer, as premature rate cutting risks further inflating asset prices or causing another leg up in inflation,” he wrote.

To Chris Senyek at Wolfe Research, the U.S. equity market is likely to push higher until economic data signals a significant slowdown ahead or inflation looks sticky enough to keep the Fed from cutting rates deeply and quickly.

“The market’s relentless rally, in which it embraces even the mostly slightly bullish news and ignores any bad news (known as a ‘Teflon’ market because nothing sticks) is raising this question: Can anything make the stock market decline?” said Tom Essaye, founder of The Sevens Report. 

“The answer, of course, is ‘yes’.”

Slowing growth, reduced rate-cut expectations, falling earnings expectations are among the factors that could lead to that, he added.

Nouriel Roubini, the economist known for his bearish outlook ahead of the 2008 global financial crisis, expressed optimism that U.S. growth will remain brisk this year — though that might be a negative for stocks.

“There actually is a serious possibility of what people refer to as a ‘no landing,’ that growth remains above potential and inflation remains sticky,” Roubini told Bloomberg Surveillance. “Paradoxically, the good news on growth may be bad news for the market if that implies the Fed is not going to cut as much and as soon as people expect.”

Fed Bank of Atlanta President Raphael Bostic said he expects the Fed’s first cut — which he has penciled in for the third quarter — will be followed by a pause the following meeting to assess how the policy shift is affecting the economy.

Powell heads to Capitol Hill for his semiannual testimony before Congress — two years after the central bank began its aggressive battle against surging inflation. With the economy powering along and inflation inching toward the Fed’s sweet spot, Powell will make the case for why officials are in no rush to lower rates.

Fed officials’ most recent quarterly forecast in December was for three quarter-point cuts this year — and the bond market has embraced that view, based on the prices of swap contracts that reference future Fed meeting dates.

“If Powell says something to the effect that rate cuts will come in the second half of the year, then that can catalyze a move to pricing in two cuts,” said Steve Bartolini, portfolio manager at T. Rowe Price Group Inc.

Bets on rate cuts and the artificial-intelligence euphoria spurred a fourth-consecutive month of gains for stocks — defying concerns over and over again that the market has topped after its almost 35 per cent run since the start of last year.

The gains have left strategists scrambling to lift their end-2024 targets.

Bank of America Corp.’s Savita Subramanian was the latest to ratchet up her target for the S&P 500 to among the highest on Wall Street.

She now expects the benchmark to end the year at 5,400, compared with her earlier target of 5,000. Indicators are flashing bullish signals on stronger earnings growth ahead and “surprising” profit margin resilience, she said. 

The S&P 500’s advance to a record high — fueled by a small group of supercharged technology stocks — doesn’t resemble past bubbles, according to strategists at Goldman Sachs Group Inc.

Stocks with an enterprise value-to-sales ratio of above 10 account for 24 per cent of total U.S. equity market capitalization, versus 28 per cent during 2021 and 35 per cent during the tech bubble, strategist David Kostin wrote. However, the breadth of “extreme valuations” is far more contained with the number of stocks trading at those multiples down sharply from the peak in 2021, he added.

“This time is different,” Kostin said. “Unlike the broad-based ‘growth at any cost’ in 2021, investors are mostly paying high valuations for the largest growth stocks in the index. We believe the valuation of the Magnificent 7 is currently supported by their fundamentals.”

Corporate Highlights:

Apple Inc. was hit Monday with a €1.8 billion ($2 billion) penalty from the European Union over an investigation into allegations it shut out music-streaming rivals, including Spotify Technology SA, on its platforms.
American Airlines Group Inc. agreed to buy 260 short-haul aircraft that include a huge deal for Boeing Co. 737 Max jets, a key endorsement of the planemaker as it works through a crisis of confidence following a near-catastrophic accident in January.
Coinbase Global Inc., the biggest U.S. cryptocurrency exchange, said some individual investors saw zero balances in their accounts for the second time in less than a week.
JetBlue Airways Corp. formally abandoned its pursuit of Spirit Airlines Inc. more than a month after a federal judge blocked the $3.8 billion acquisition on antitrust grounds.
Arkhouse Management Co. and Brigade Capital Management boosted their offer for Macy’s Inc. by 14 per cent after the retailer rebuffed a previous proposal.

Key Events This Week:

Bank of Japan Governor Kazuo Ueda speaks, Tuesday
China Caixin services PMI, Tuesday
China kicks off its 14th National People’s Congress, Tuesday
Eurozone S&P Global Services PMI, PPI, Tuesday
U.S. factory orders, ISM services, S&P Global Services PMI, Tuesday
Super Tuesday in the U.S., with North Carolina, California, Texas and Oklahoma among more than a dozen states holding Republican and Democratic primaries
Canada rate decision, Wednesday
Eurozone retail sales, Wednesday
U.S. ADP employment, JOLTS job openings, Wednesday
Fed Chair Jerome Powell testifies before the House Financial Services Committee, Wednesday
Fed issues Beige Book, Wednesday
Fed’s Neel Kashkari (Minneapolis) and Mary Daly (San Francisco) speak, Wednesday
China trade, forex reserves, Thursday
European Central Bank’s rate decision, Thursday
U.S. initial jobless claims, trade, Thursday
President Joe Biden delivers the State of the Union address, Thursday
Fed Chair Jerome Powell testifies before the Senate Banking Committee, Thursday
Cleveland Fed President Loretta Mester speaks, Thursday
Eurozone GDP, Friday
U.S. nonfarm payrolls, unemployment, Friday
New York Fed President John Williams speaks, Friday
ECB Governing Council member Robert Holzmann speaks, Friday

Some of the main moves in markets:


The S&P 500 was little changed as of 2:09 p.m. New York time
The Nasdaq 100 fell 0.2 per cent
The Dow Jones Industrial Average fell 0.3 per cent
The MSCI World index was little changed


The Bloomberg Dollar Spot Index was little changed
The euro rose 0.2 per cent to $1.0857
The British pound rose 0.3 per cent to $1.2691
The Japanese yen fell 0.3 per cent to 150.54 per dollar


Bitcoin rose 6 per cent to $66,620.02
Ether rose 3.5 per cent to $3,598.96


The yield on 10-year Treasuries advanced four basis points to 4.22 per cent
Germany’s 10-year yield declined two basis points to 2.39 per cent
Britain’s 10-year yield was little changed at 4.12 per cent


West Texas Intermediate crude fell 1.6 per cent to $78.66 a barrel
Spot gold rose 1.5 per cent to $2,114.32 an ounce