BNN Bloomberg's closing bell update: Oct. 4, 2023
The selloff in stocks and bonds got a reprieve Wednesday as traders parsed U.S. data and increased bets that the Federal Reserve can refrain from further interest rate increases.
Equity benchmarks touched session highs in the final minutes of trading with the Nasdaq 100 rising 1.4 per cent and the S&P 500 0.8 per cent higher after a final run-up in the tech sector. Tesla Inc. was at the forefront of the advance in large-cap tech names that also included Microsoft Corp. and Amazon.com Inc. The S&P 500 closed above a key technical level.Ten-year Treasury yields were lower on the day after the rate on the benchmark touched a high of 4.88 per cent during Asian trading hours. Traders are now pricing a less than one-in-five chance of an increase in November, down from one-in-three previously.
Wednesday’s rebound was bolstered by data showing U.S. companies added the fewest number of jobs since the start of 2021 in September, suggesting labor demand in several industries is slowing. A separate report showed the services sector also pulled back modestly last month to the lowest level this year.
The latest leg of the selloff had been fueled by Tuesday’s better-than-expected U.S. job data, as well as a slew of hawkish comments from Federal Reserve officials. As conviction grew that U.S. interest rates could rise further from current 22-year highs, 30-year yields touched 5 per cent for the first time since 2007.
Wall Street has been saying longer term bonds at 5 per cent yields are likely in the near-term. One-time bond king Bill Gross weighed in saying that the U.S. 10-year at 5 per cent would provide “decent” but not “great value” as inflation remains high.
Volatility could make another appearance when Friday’s payrolls numbers hit as traders search for signs that the economy is cooling and the Fed can pull back from its higher-for-longer messaging.
“Stock investors have been hoping the labor market will loosen up and give the Fed enough breathing room to dial down its hawkishness,” said Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office. “ADP isn’t necessarily a reliable predictor of the government’s monthly jobs data, but if Friday’s report also shows the labor market is cooling, stock investors may worry a little less about indefinitely higher interest rates.”
In commodities, crude futures dropped and gold slid.
“Recent developments support our view that markets had become overly confident in pricing a rapid easing of the Fed’s monetary policy,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management. “While we expect equity and bond market conditions to improve, we forecast choppy and rangebound trading in equity markets in the near term.”
Key events this week:
- China has week-long holiday
- France industrial production, Thursday
- BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
- U.S. trade, initial jobless claims, Thursday
- San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
- Germany factory orders, Friday
- U.S. unemployment rate, nonfarm payrolls, Friday
- Some of the main moves in markets:
- The S&P 500 rose 0.8 per cent as of 4 p.m. New York time
- The Nasdaq 100 rose 1.4 per cent
- The Dow Jones Industrial Average rose 0.4 per cent
- The MSCI World index rose 0.3 per cent
- The Bloomberg Dollar Spot Index fell 0.2 per cent
- The euro rose 0.5 per cent to US$1.0515
- The British pound rose 0.6 per cent to $1.2150
- The Japanese yen was little changed at 149.04 per dollar
- Bitcoin rose 0.8 per cent to $27,617.31
- Ether fell 0.9 per cent to $1,642.44
- The yield on 10-year Treasuries declined seven basis points to 4.72 per cent
- Germany’s 10-year yield declined five basis points to 2.92 per cent
- Britain’s 10-year yield declined two basis points to 4.58 per cent
- West Texas Intermediate crude fell 5 per cent to $84.73 a barrel
- Gold futures fell 0.2 per cent to $1,838.50 an ounce