(Bloomberg) — Stocks hovered near all-time highs, with traders hoping to get more clues on the Federal Reserve’s outlook as Jerome Powell concludes two days of Congressional hearings.
Most Read from Bloomberg
Equities rose for a seventh straight day, driving the S&P 500 toward its longest winning run since November. Treasuries stabilized amid firming bets the Fed will be able to ease policy before the year is over. In fact, swap traders are pricing in about two quarter-point cuts in 2024, with a roughly 70% chance the first comes at the September Fed gathering.
*POWELL: FED DOESN’T NEED INFLATION BELOW 2% BEFORE RATE CUT
Speaking to lawmakers Wednesday, Powell said “I do have some confidence” inflation is headed lower, but he Fed wants to be more confident. He also cited a “good ways to go” on the balance-sheet runoff. Neutral rates must have moved up at least in the short term, and the Fed will be looking at a review later this year, Powell added. He reiterated regulators are close to capital rule changes.
“Markets remain remarkably calm despite the flood of data this week, including Fed Chair Powell’s testimony, CPI/PPI reports, and the beginning of earnings season,” said Mark Hackett at Nationwide. “This could be challenged by the CPI reading.”
The S&P 500 hovered near 5,590, with tech up and financial shares down. Nvidia Corp. and Apple Inc. led gains in megacaps. Advanced Micro Devices Inc. agreed to buy Silo AI for $665 million in cash. Intuit Inc. is cutting 1,800 employees, swapping out low performers and executives with fresh hires meant to sharpen the company’s focus on products that use artificial intelligence.
Treasury 10-year yields were little changed at 4.3%. That’s ahead of a $39 billion auction of the bonds. Bank of England Chief Economist Huw Pill said that the timing of a rate cut is still an “open question,” prompting traders to pare bets on an August. Oil rose on a bullish US inventory report.
The Fed will likely have to end quantitative tightening in December with bank reserves at $3.1 trillion, reiterating an earlier forecast, Barclays strategist Joseph Abate wrote in a note.
Fed’s balance sheet normalization has so been smooth and without strain in funding markets. Tipping point for reserves depends on the relationship between the Fed’s supply “and the unknown, and importantly, time-varying, level of bank demand,” Abate wrote
Wall Street’s most-prominent trading desks say investors should gear up for a potential break in the eerie calm that’s recently descended on the market.
The options market is betting the S&P 500 Index will move 0.8% in either direction after Thursday’s report on consumer prices, based on the price of that day’s at-the-money straddles, according to Stuart Kaiser, Citigroup’s head of US equity trading strategy. If it happens, that would be the biggest move for the index since June 12, the day of the last CPI print and interest-rate decision.
Market volatility may pick up in the days and weeks ahead, amid US political uncertainty, comments from the Fed chair, and the start of the second-quarter earnings season, according to Mark Haefele at UBS Global Wealth Management.
As the Fed sits on pause, so does banks’ biggest source of revenue.
Net interest income — the difference between what banks earn on their assets and what they pay on debts — at the four largest lenders surged to a record last year on the back of higher interest rates. But analysts are now predicting a second straight drop when lenders start reporting second-quarter results.
JPMorgan Chase & Co. and Citigroup Inc. kick off bank earnings on Friday. Market-making activity was mixed, with equity trading outperforming fixed income.
Corporate Highlights:
-
Microsoft Corp. and Apple Inc. dropped plans to take board roles at OpenAI in a surprise decision that underscores growing regulatory scrutiny of Big Tech’s influence over artificial intelligence.
-
3M Co. Chief Financial Officer Monish Patolawala is stepping down to take the same role at another company, further shaking up the industrial product maker’s leadership after a CEO change earlier this year.
-
Honeywell International Inc. agreed to buy Air Products and Chemicals Inc.’s liquefied natural gas process technology and equipment business for $1.81 billion in cash.
-
Samsung Electronics Co. sees the addition of AI features as the key to reclaiming its title as the world’s leading maker of foldables, mobile chief TM Roh said on the eve of unveiling its latest models.
-
Samsung’s largest labor union of more than 30,000 workers declared an indefinite strike, a surprise move that raises the risk of production disruptions.
-
Key events this week:
-
US CPI, initial jobless claims, Thursday
-
Fed’s Raphael Bostic and Alberto Musalem speak, Thursday
-
China trade, Friday
-
University of Michigan consumer sentiment, US PPI, Friday
-
Citigroup, JPMorgan and Wells Fargo’s earnings, Friday
Some of the main moves in markets:
Stocks
-
The S&P 500 rose 0.3% as of 11:26 a.m. New York time
-
The Nasdaq 100 rose 0.3%
-
The Dow Jones Industrial Average rose 0.2%
-
The Stoxx Europe 600 rose 0.9%
-
The MSCI World Index rose 0.4%
Currencies
-
The Bloomberg Dollar Spot Index was little changed
-
The euro rose 0.1% to $1.0825
-
The British pound rose 0.4% to $1.2843
-
The Japanese yen fell 0.2% to 161.71 per dollar
Cryptocurrencies
-
Bitcoin fell 0.2% to $57,834.26
-
Ether rose 1.3% to $3,111.54
Bonds
-
The yield on 10-year Treasuries was little changed at 4.30%
-
Germany’s 10-year yield declined four basis points to 2.54%
-
Britain’s 10-year yield declined three basis points to 4.13%
Commodities
-
West Texas Intermediate crude rose 1.3% to $82.43 a barrel
-
Spot gold rose 0.6% to $2,377.84 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher, Richard Henderson, Joel Leon and Jessica Menton.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
