Stocks defy bleak data to close near day’s high: Market conclusion

(Bloomberg) – U.S. stocks rose for the second day in a row, with megacaps catching up with offers as investors digested weak data on New York manufacturing and the Chinese economy. Treasuries gained along with the dollar, while commodities, from oil to iron ore, fell.

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The S&P 500 closed near the day’s highs, reversing losses of up to 0.5%, with only the energy and materials sectors ending in the red. The tech-heavy Nasdaq 100 outperformed, Tesla Inc., Apple Inc., Microsoft Corp. and Nvidia Corp. leading the gains. Treasury yields fell and the bond curve remained deeply inverted, indicating potential recession risks in the United States as the Federal Reserve tightens monetary policy.

U.S. stocks just posted a fourth consecutive weekly gain, the longest this year, with sentiment buoyed by signs of easing price pressures that raised hopes of a Fed shift to higher less aggressive rates and a gradual slowdown in the economy. Still, the rally left the breadth of the market looking stretched with stocks vulnerable to a pullback.

“The magnitude of this bear market rally surprised many, including us,” Morgan Stanley strategists, including Michael Wilson, wrote in a note. “In our view, this was driven by a combination of better-than-expected Q2 earnings (although revisions/prices were down in the quarter), light positioning, and continued hope for a less Fed trajectory. warmonger.”

In corporate news, activist investor Dan Loeb said he bought a stake in Walt Disney Co. and called for sweeping changes. Shares rose for a fourth day to their highest since April. Big box retailers take center stage this week with Walmart Inc., Home Depot Inc. and Target Corp. due to the publication of their profits.

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“Traders seemingly embraced lower inflation last week and pushed stocks to their highest levels since early May,” Chris Larkin, managing director of trading at Morgan Stanley’s E*Trade, said in a note. “Although with inflation still unsustainable and the Fed need to keep raising interest rates, the possibility of an inflation ‘headache’ after last week’s data remains.”

A New York state manufacturing activity indicator dipped to the second lowest in data dating back to 2001, with sharp declines in orders and shipments pointing to a sharp slowdown in demand, according to a report released Monday.

Read more: Roubini sees either a hard landing in the US or runaway inflation

Meanwhile, data showed China’s retail sales, investment and industrial production in July missed economists’ estimates, and in the eurozone, recession risk rose to its highest level since November. 2020, according to economists polled by Bloomberg.

Oil lost more than 3%, while iron ore, copper and other metals fell amid growing fears that China’s slow recovery could dampen demand for commodities. Gold retreated below $1,800 an ounce and Bitcoin hovered above $24,000.

“We would caution investors not to get too excited or continue this rally,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “There is a decent risk that the Fed will have to raise rates more than we and the market currently expects, a possibility that would quickly cool warming sentiment. It would also increase the downside risks to growth, which are already prevalent. .

Here are some key events to watch this week:

  • Revenue includes Walmart, Target, Home Depot, Tencent

  • Federal Reserve July Minutes, Wednesday

  • New Zealand rate decision, Wednesday

  • UK CPI, US retail sales, Wednesday

  • Unemployment in Australia, Thursday

  • US existing home sales, initial jobless claims, Conference Board leading index, Thursday

  • Fed’s Esther George and Neel Kashkari speak at separate events on Thursday

Some of the major movements in the markets:

Shares

  • The S&P 500 rose 0.4% at 4 p.m. PT

  • The Nasdaq 100 rose 0.7%

  • The Dow Jones Industrial Average rose 0.4%

  • The MSCI World index rose 0.2%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.7%

  • The euro fell 1% to $1.0159

  • The British pound fell 0.7% to $1.2054

  • The Japanese yen was little changed at 133.30 per dollar

Obligations

  • The yield on 10-year Treasury bills fell three basis points to 2.80%

  • Germany’s 10-year yield fell nine basis points to 0.90%

  • The UK 10-year yield fell nine basis points to 2.02%

Goods

  • West Texas Intermediate crude fell 3.4% to $88.97 a barrel

  • Gold futures fell 1.2% to $1,794.30 an ounce

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