Stock rally stalls on 'contradictory’ economic signs: Markets wrap

(Bloomberg) — Stocks lost ground on Friday for the best week of 2024, with traders assessing the latest economic data for clues on Federal Reserve policy.

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After a six-day rally, the S&P 500 remained volatile amid a „consolidation” of those gains. A week ahead of Jerome Powell’s speech on Wall Street in Jackson Hole, Wyoming, the economy paused to assess a set of data that signaled the Fed may not need to deploy aggressive easing because the economy is not falling off a cliff. That outlook led traders to scale back their bets on jumbo rate cuts this week, as the market still prepares for the first cut in September.

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Atlanta Fed GDPNow Index falls to 1.99% from 2.44%

Friday brought another mixed reading on the economy. US consumer sentiment rose in early August for the first time in five months, with more optimistic expectations about their finances as inflation stabilized. Warning: The surge in sentiment after President Joe Biden’s decision not to seek re-election was partly driven by political reasons. New home construction has hit record lows since the pandemic.

„With economic data giving conflicting signals, investors should expect more volatility going forward,” said Jeff Roach at LPL Financial.

Florian Ailbo at Lombard Odier Investment Managers said the economic data still comes with „contradictions” – a caution against overconfidence.

„A fresh wave of U.S. data has convinced markets that a recession is not imminent,” Ielpo said. „Although the market was quick to anticipate a slowdown, it may have been too hasty to dismiss this risk: Doubts persist more than market valuations suggest.”

The S&P 500 was volatile. When it comes to its main groups, the film was a mixed bag. Industrials and technology lagged, while financials outperformed. Applied Materials Inc. sank after a sales forecast that disappointed investors who had expected higher profits from artificial intelligence spending.

The 10-year Treasury yield was little changed at 3.92%. The dollar fell. Gold briefly rose to $2,500.

Fed Chair Powell will speak at the Fed’s Jackson Hole Economic Policy Symposium next Friday in Kansas City.

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Powell’s comments will be closely watched for any clues about how the central bank chief views the economy in the wake of a weaker-than-expected jobs report, as the central bank has been on pace to cut interest rates for more than two decades. And further easing inflation.

The central bank is widely expected to cut borrowing costs at its next meeting on September 17-18, but there is some disagreement over how big that cut will be.

„The key message from Fed Chair Jerome Powell’s speech was that monetary policy has generally worked as intended and current rates will remain on hold,” said Anna Wong in Bloomberg Economics. “He could say that the risk balance between the central bank’s mandates — employment and inflation — is almost equal. We expect him to signal that a rate cut is coming, but did not specify whether it would be 25 basis points or 50 bps. That depends on the August jobs report.

Five Big Questions for the Fed at Jackson Hole: Bill Dudley

Next week’s Jackson Hole Symposium will be the „perfect platform” for the Fed to set policy expectations for September, according to TD Securities strategists.

„Given recent progress, we expect Powell to ease policy next month without fully committing to the extent of a rate cut,” they noted. “We expect a reduction of 25 basis points. The July FOMC minutes will provide a preview to facilitate Wednesday’s deliberations.

According to the latest data, a 25-basis-point cut in September looks more likely than a major cut, given the central bank’s increasing importance on the labor market, Fawad Razakzada said, adding that the next jobs report will be important in determining the final outcome. City code and Forex.com

„Any strong hints of tapering at the Jackson Hole Symposium in September could further weaken the dollar and lower the gold forecast,” he said.

Bank of America Corp. In , Ralf Preusser said the next few weeks will determine whether the Fed cuts by 50-75 basis points this year or more aggressively.

„We maintain a positive bias on US rates and will see the Jackson Hole-induced sell-off as a buying opportunity,” he noted.

Company Highlights:

• Texas Instruments Inc. $1.6 billion in CHIPS Act grants and $3 billion in loans, the Biden administration announced Friday, marking the latest major award for a program designed to boost U.S. semiconductor manufacturing.

• Rivian Automotive Inc. has halted production of an electric commercial van it makes for Amazon.com Inc. due to parts shortages in the latest supply chain snafu for the EV maker. Suspended.

• Bayer AG shares rose following a landmark victory for the German company in a long-running cancer case over its Roundup herbicide.

• BHP Group and union leaders in Chile reached a preliminary wage deal on Friday, setting the stage for normal production to resume at the world’s largest copper mine.

• Pfizer Inc. and BioNTech SE, a covid-flu vaccine combination has missed one of its targets in a late-stage trial, a setback for companies looking for profitable new uses for technology that has succeeded in pandemics.

• Autodesk Inc. It continued to use the controversial sales strategy after promising investors and ignoring internal warnings about the risks of doing so, according to previously undisclosed internal documents.

Some key movements in the markets:

Shares

• The S&P 500 was little changed at 11:37 a.m. New York time

• The Nasdaq 100 fell 0.2%

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 rose 0.3%

• The MSCI world index rose 0.3%

• The Bloomberg Magnificent 7 Total Revenue Index was little changed

• The Russell 2000 index is little changed

Coins

• The Bloomberg Dollar Spot Index fell 0.3%

• The euro rose 0.2% to $1.0995

• The British pound was up 0.4% at $1.2902

• The Japanese yen rose 0.7% to 148.24 per dollar

Cryptocurrencies

• Bitcoin rose 2% to $57,831

• Ether rose 0.6% to $2,565.72

Bonds

• The yield on 10-year Treasuries was little changed at 3.92%.

• Germany’s 10-year yield was little changed at 2.25%

• Britain’s 10-year yield rose one basis point to 3.93%

materials

• West Texas Intermediate crude was down 1.7% at $76.84 a barrel.

• Spot gold rose 1.2% to $2,486.84 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from John Viljon and Richard Henderson.

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