Cyclicals Lead Stock Gains in Run-Up to Jobs Data: Markets Wrap
(Bloomberg) — Stocks rose ahead of key jobs data that will shape bets on the path of interest rates and the Federal Reserve’s massive bond-buying program. Treasuries were little changed.
The S&P 500 climbed toward a record, with commodity, industrial and financial shares among the biggest gainers. Applications for U.S. state unemployment benefits fell to a pandemic low last week. The figures came just before the monthly payrolls reading due Friday, which is forecast to show 725,000 jobs were added in August.
Treasury yields have barely budged since Fed Chair Jerome Powell last week said the central bank could begin tapering its asset purchases this year. But that calm faces a test with the jobs data. The potential for volatility comes from the fact that when officials gather this month, they will release fresh projections for the fed funds rate. And with the labor market pivotal for policy now, Friday’s report is seen as laying the foundation for these forecasts.
“Most market watchers aren’t expecting the U.S central bank to announce its taper plans until its November meeting at the earliest, a full three non-farm payroll (NFP) reports from now,” Matt Weller, global head of research at Forex.com and City Index, wrote in a note to clients. “Nonetheless, traders will still key in on Friday’s big jobs report to see if the labor market is recovering as expected.”
Read: Morgan Stanley Sees Concentrated U.S. Slowdown in Third Quarter
Investors’ concerns about economic growth are overdone, opening the way for potential gains in cyclical assets in the near future, according to Goldman Sachs Group Inc. While economically sensitive sectors dominated the leaderboard for the first half of 2021, they’ve lagged in recent months as the delta coronavirus variant prompted concerns about the pace of the economic recovery.
“The market is worrying too much about global cyclical risks from Delta outbreaks and China’s slowdown, and our Fed forecast is still more dovish than the market’s,” Goldman strategists led by Zach Pandl said in a note. “So we think some further relief in cyclical assets — higher equities and higher bond yields — is likely over the near term.”
Meantime, Bill Gross, who co-founded Pacific Investment Management Co. in the 1970s and retired in 2019, said longer-term Treasury yields are so low that the funds that buy them belong in the “investment garbage can.” Ten-year yields are likely to climb to 2% over the next 12 months, he wrote. The benchmark bond rate is currently around 1.3%.
Read: Templeton, BNP Brace for Higher Real Yields as Inflation Cools
Some corporate highlights:
Cryptocurrency-exposed stocks climbed, with Bitcoin trading near the closely watched $50,000 level.Netflix Inc. rallied after Citigroup Inc. raised its price target for the video-streaming company.Virgin Galactic Holdings Inc. is planning its next suborbital spaceflight late this month or in early October.Electric-car maker Tesla Inc. temporarily halted some operations at its factory in Shanghai last month, according to people familiar with the matter, amid the global shortage of semiconductors.
Here are some key events to watch this week:
U.S. jobs report Friday
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.3% as of 12:17 p.m. New York timeThe Nasdaq 100 was little changedThe Dow Jones Industrial Average rose 0.4%The MSCI World index rose 0.3%
Currencies
The Bloomberg Dollar Spot Index fell 0.2%The euro rose 0.2% to $1.1860The British pound rose 0.4% to $1.3828The Japanese yen was little changed at 110.02 per dollar
Bonds
The yield on 10-year Treasuries was little changed at 1.29%Germany’s 10-year yield declined one basis point to -0.38%Britain’s 10-year yield declined one basis point to 0.68%
Commodities
West Texas Intermediate crude rose 2.5% to $70.30 a barrelGold futures fell 0.3% to $1,811.10 an ounce
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Read more: https://mcc.exchange/2021/09/02/cyclicals-lead-stock-gains-in-run-up-to-jobs-data-markets-wrap/
Text source: MCC.EXCHANGE
