The stock market kept its bullish momentum as traders geared up for a pause in one of the Federal Reserve’s most-aggressive tightening campaigns in decades.
(Bloomberg) — The stock market kept its bullish momentum as traders geared up for a pause in one of the Federal Reserve’s most-aggressive tightening campaigns in decades.
Big tech led equity gains, with the Nasdaq 100 up 1% and the S&P 500 topping 4,300. Both gauges headed toward the highest since April 2022. Tesla Inc. climbed for a 12th straight session — set for a record winning run — and Oracle Corp. rallied 6% ahead of its results. Citizens Financial Group Inc. and KeyCorp led losses in banks after disappointing updates at an industry conference.
Treasury two-year yields, which are more sensitive to imminent central bank moves, fluctuated. The Bloomberg Dollar Spot Index was little changed. Another slide in oil reduced concern about inflation.
In the run-up to the Fed decision, Tuesday’s consumer price index is expected to be one of the key drivers for markets this week. Economists surveyed by Bloomberg predict core inflation, excluding food and energy, moderating to 5.2% from a year earlier.
To David Kelly, chief global strategist at J.P. Morgan Asset Management, the Fed should weigh progress on inflation against the risk of recession in its June meeting.
“The numbers just won’t support any further tightening, and this will become clearer in the next few weeks,” Kelly said. “If so, the investment environment could support lower long-term interest rates, a lower dollar and further gains in stock prices, as investors no longer have to fight a Fed that no longer has to fight inflation.”
The Federal Open Market Committee will keep rates steady at its June 13-14 meeting at the 5%-5.25% range, though officials face a closer call in July on what to do, according to economists surveyed by Bloomberg. Swaps show roughly a quarter-point of additional tightening is currently priced by next month’s meeting.
‘Hawkish Skip’
A “hawkish skip” would only buy the Fed a little bit of time, according to Neil Dutta at Renaissance Macro Research.
“If the Fed decides to skip the June meeting, as I anticipate, I don’t think they have a choice but to sound hawkish given their data-dependent pledge,” Dutta added.
Prospects for a pause in rate hikes helped the S&P 500 enter a bull market last week after gaining 20% from its October low. Wall Street’s top strategists are split on the way forward.
Goldman Sachs Group Inc.’s David Kostin expects the gains to continue as other sectors catch up with the searing rally for technology shares. Morgan Stanley’s Michael Wilson, meanwhile, points instead to the bear market of the 1940s, when the S&P 500 rallied 24% before returning to a new low.
In other corporate news, Advanced Micro Devices Inc. rallied as multiple analysts raised their price targets on the chipmaker. Amazon.com Inc. gained after Bank of America Corp. cited an improved margin picture. A trio of cruise-line operators jumped as BofA and JPMorgan Chase & Co. signaled increasing confidence in demand. Nasdaq Inc. tumbled after agreeing to buy financial-software maker Adenza from its private equity owners.
Elsewhere, oil fell amid persistent concerns around the demand outlook as Goldman Sachs cut its price forecast again. Bitcoin dropped as last week’s regulatory crackdown by the US Securities and Exchange Commission weighed on sentiment.
Key events this week:
- US CPI, Tuesday.
- Eurozone industrial production, Wednesday.
- US PPI, Wednesday.
- Federal Reserve rate decision, updated economic forecasts, Jerome Powell’s press conference, Wednesday.
- IEA oil market report, Wednesday.
- China property prices, retail sales, industrial production, Thursday.
- China central bank meeting to decide on one-year policy loan rate, Thursday.
- European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday.
- US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday.
- Bank of Japan rate decision, Friday.
- US University of Michigan consumer sentiment, Friday.
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.5% as of 2:37 p.m. New York time
- The Nasdaq 100 rose 1.2%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro was little changed at $1.0754
- The British pound fell 0.5% to $1.2504
- The Japanese yen fell 0.2% to 139.61 per dollar
Cryptocurrencies
- Bitcoin fell 1.2% to $25,812.07
- Ether fell 2% to $1,735.17
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.76%
- Germany’s 10-year yield advanced one basis point to 2.39%
- Britain’s 10-year yield advanced 10 basis points to 4.34%
Commodities
- West Texas Intermediate crude fell 4.3% to $67.12 a barrel
- Gold futures fell 0.3% to $1,971.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Isabelle Lee, Carly Wanna, Emily Graffeo and Peyton Forte.
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