(Bloomberg) — The stock market is ending the week on a positive note, with traders wading through economic data and Fedspeak for clues on the interest-rate outlook.
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US consumer sentiment soared in early January to the highest since 2021, far exceeding expectations, as short-term inflation expectations slipped to a three-year low. A drop in Treasury volatility continued to bode well for the S&P 500’s most-influential group, with technology shares outperforming and putting the US equity benchmark on the brink of its all-time high.
The stocks that led the rally in 2023 are again traders’ top picks, according to Bank of America Corp.’s Michael Hartnett, who says investors are reverting to owning growth, technology, the “AI bubble” and the so-called Magnificent Seven. While US shares saw redemptions at $4.3 billion in the week through Jan. 17, tech-stock funds saw the biggest two-week inflow since August at $4 billion, BofA said, citing EPFR Global data.
“Bottom line, we’re off the bullish boil and the boat is less full, but it’s still leaning firmly positive,” said Peter Boockvar, author of the Boock Report.
The S&P 500 erased this week’s losses while the tech-heavy Nasdaq 100 outperformed after hitting a record Thursday. Treasury 10-year yields edged up. The dollar wavered.
Markets are overpricing the pace and amount of Fed-rate cuts as they are overlooking stubbornly high inflation, according to economist Mohamed El-Erian.
“I do think that we get to the pivot, but relative to what the market expects, it won’t be as fast or as deep,” said El-Erian, president of Queens’ College, Cambridge, and a Bloomberg Opinion columnist.
Traders have tempered their wagers on rate cuts as US economic data continued to show resilience and Fed officials emphasized they want to ensure inflation is tamed before embarking on any cuts.
Two-year yields about matched those on 30-year bonds as of Friday morning in New York. As for Fed cuts, markets are now pricing in about 1.4 percentage points of reductions this year, compared with expectations of as much as 1.7 percentage points of easing as recently as last week. Meanwhile, March rate cuts that were largely baked into the market are now seen as more of a toss-up.
Policymakers penciled in three rate cuts in projections released after their December gathering. The Fed, which left interest rates unchanged last month, is anticipated to keep rates in a range of 5.25% to 5.5% for a fourth straight meeting when they convene Jan. 30-31.
Corporate Highlights:
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Apple Inc. vowed to open up its coveted tap-to-pay technology on iPhones to rivals in a bid to sidestep potentially massive European Union antitrust fines.
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Amazon.com Inc.’s proposed $1.4 billion acquisition of Roomba maker iRobot Corp. is expected to be blocked by the European Union’s antitrust regulator over concerns that the deal will harm other robot vacuum makers.
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Ford Motor Co. cut production of its F-150 Lightning electric truck amid fading demand for electric vehicles.
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Spirit Airlines Inc. said its deal with JetBlue Airways Corp. “remains in full force and effect” as the carrier explores ways to shore up its liquidity, offering investors a measure of relief after a court decision blocked the multibillion-dollar buyout.
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J.B. Hunt Transport Services Inc. hauled more containers of freight than Wall Street expected in the fourth quarter, suggesting the sector may be recovering after a bad year.
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SLB raised its payout to shareholders 10%, marking the highest dividend since 2020, as growth in drilling outside of North America buoyed results for the world’s biggest oilfield contractor.
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Ally Financial Inc. announced fourth-quarter results that topped analysts’ estimates and said it will sell a point-of-sale financing business that includes $2.2 billion of loan receivables to Synchrony Financial.
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Comerica Inc. said net interest income will probably slide 11% this year and reported a plunge in fourth-quarter profit on a series of one-time charges.
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.3% as of 10:01 a.m. New York time
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The Nasdaq 100 rose 0.7%
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The Dow Jones Industrial Average rose 0.3%
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The Stoxx Europe 600 fell 0.1%
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The MSCI World index rose 0.5%
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro was little changed at $1.0884
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The British pound fell 0.2% to $1.2677
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The Japanese yen was little changed at 148.24 per dollar
Cryptocurrencies
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Bitcoin fell 0.2% to $40,967.34
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Ether rose 0.8% to $2,472.56
Bonds
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The yield on 10-year Treasuries advanced three basis points to 4.17%
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Germany’s 10-year yield was little changed at 2.34%
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Britain’s 10-year yield was little changed at 3.94%
Commodities
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West Texas Intermediate crude rose 0.9% to $74.77 a barrel
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Spot gold rose 0.3% to $2,029.17 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Farah Elbahrawy, Michael Mackenzie and Liz Capo McCormick.
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