Stocks Rise At Start Of Busy Week For Wall Street: Markets Wrap

(Bloomberg) -- The start of a busy week for markets has stocks rising, with traders awaiting Jerome Powell’s testimony and Friday’s jobs figures for clues on the outlook for Federal Reserve policy.

After the brutal recalibration of bets on central bank hikes, Treasury yields have stabilized, paving the way for a rebound in equities, with the S&P 500 showing resilience above its key 200-day moving average. Underpinning that near-term strength is the growing perception that the Fed peak rate possibly won’t be much higher than what’s already been priced in by markets.

A drop in bond yields and technical factors could give support to equities in the near term, according to Morgan Stanley’s Michael Wilson, one of the most-vocal bearish voices on US stocks. The caveat is that he doesn’t expect the “bear-market rally” to last long as fundamentals continue to deteriorate, especially on the earnings front.  

There are plenty of risks indeed. A double-day dose of Fed Chair Powell before Congress this week will set bets for the US central bank’s policy meeting later this month. He’s expected to echo some of his Fed colleagues’ recent remarks suggesting rates will go higher than anticipated if economic data continue to come in hot.

“As stocks attempt to build on last week’s late rebound, investors will be focused on Powell’s congressional testimony and Friday’s jobs report,” Chris Larkin, managing director at E*Trade from Morgan Stanley. “Traders are still anticipating a 25-basis point hike in a few weeks, and investors should prepare for volatility if the jobs read surprises in either direction especially as some Fed officials have indicated a 50-basis point hike remains on the table.”

To Krishna Guha at Evercore, Powell will open the door to a calibrated upward move in the estimated peak interest rate in March if the next batch of data confirms the strength from January, but will not turn max hawkish or fuel speculation of a 50 basis-point move,

“This would not present any need to shift market rate pricing higher,” he added.

Key events this week:

• US wholesale inventories, consumer credit, Tuesday
• Fed Powell’s semiannual Monetary Policy Report to the Senate Banking Committee, Tuesday
• Australia rate decision, Tuesday
• Euro area GDP, Wednesday
• US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings, Wednesday
• Fed Chair Powell’s semiannual Monetary Policy Report to the House Financial Services Committee, Wednesday
• Canada rate decision, Wednesday
• EIA crude oil inventories, Wednesday
• China CPI, PPI, Thursday
• US Challenger job cuts, initial jobless claims, household change in net worth, Thursday
• Bank of Japan policy rate decision, Friday
• US nonfarm payrolls, unemployment rate, monthly budget statement, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 9:46 a.m. New York time
• The Nasdaq 100 rose 0.5%
• The Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 fell 0.1%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.3% to $1.0664
• The British pound fell 0.3% to $1.2003
• The Japanese yen was little changed at 135.97 per dollar

Cryptocurrencies

• Bitcoin fell 0.3% to $22,418.06
• Ether fell 0.2% to $1,568.78

Bonds

• The yield on 10-year Treasuries was little changed at 3.95%
• Germany’s 10-year yield advanced one basis point to 2.73%
• Britain’s 10-year yield was little changed at 3.85%

Commodities

• West Texas Intermediate crude fell 0.8% to $79.07 a barrel
• Gold futures rose 0.1% to $1,857 an ounce

This story was produced with the assistance of Bloomberg Automation.

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