(Bloomberg) — Tech giants led gains in stocks at the start of a week that will bring a raft of central-bank decisions from the US to England and Japan.
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The megacap space outpaced the broader market on Monday. Alphabet Inc. jumped as Bloomberg News reported Apple Inc. is in talks to build Google’s Gemini artificial-intelligence engine into the iPhone. Just hours away from Nvidia Corp.’s AI conference — and chief Jensen Huang’s keynote — expectations are high for the chipmaker to deliver news that will sustain its blistering rally.
Investors may glean more on the Federal Reserve’s resolve to ease and how close Japan is to finally exiting negative interest rates as central banks set policy for almost half the global economy. The coming week features the world’s biggest agglomeration of decisions for 2024 to date, including judgments on the cost of borrowing for six of the 10 most-traded currencies.
“It’s a jam-packed week of central bank meetings,” said Win Thin and Elias Haddad at Brown Brothers Harriman. “There are sure to be some surprises and so today’s calm is likely to give way to greater volatility ahead.”
The S&P 500 rose 1%, while the Nasdaq 100 climbed over 1.5%. Treasury 10-year yields advanced two basis points to 4.33%. The dollar was little changed. Nasdaq Inc. said it has resolved a technology glitch that disrupted premarket trading for almost three hours.
Ahead of the Fed decision, Japan will face a monumental moment in its history — with the nation expected to end its negative interest rate regime — the world’s last. Traders betting on the outcome of the Bank of Japan’s decision have boosted their positions in yen futures to the highest since 2007.
“I think that the BoJ could eclipse other central bank meetings we have this week and this should make the JPY an interesting currency for a lot of investors,” said Valentin Marinov at Credit Agricole.
The potential end of the BoJ’s policy of guiding government bond yields, known as yield curve control, will have only a limited impact on the appetite for US Treasuries, according to rates strategists at Bank of America Corp.
Bond investors who were once convinced that the Fed would start cutting interest rates this week are painfully surrendering to a higher-for-longer reality and a murky path forward for the market. Treasury yields have risen in recent days and are on the cusp of setting new highs for the year as data continues to point to persistent inflation, which is causing traders to push back their timetable for US monetary easing.
“No one expects a rate cut on Wednesday, but after last week’s double-dose of hot inflation data, everyone will be wondering whether the Fed is rethinking a June cut,” said Chris Larkin at E*Trade from Morgan Stanley. “The market will need to like what it sees in the Fed’s statement on Wednesday, and get confirmation from Jerome Powell that two months of sticky inflation numbers won’t derail the Fed’s game plan.”
Recent data has painted an ambiguous picture about the growth and inflation trends in the US economy, but it’s best not to over-analyze each data point and instead be clear-headed about the general direction of travel, said Jason Draho at UBS Global Wealth Management.
“It’s a fairly healthy US macro environment, and it should stay that way,” Draho said. “The Fed is likely to communicate the same message this week, and it seems inclined to do what it can to support that outlook. This is directionally positive for financial markets, and that’s not even accounting for the AI tailwind. Speed bumps, or turbulence, more aptly, aren’t enough to derail the soft-landing trajectory.”
US stocks will beat Treasuries over the next month, according to the latest MLIV Pulse survey. That’s the fifth consecutive poll in which majority of respondents opted for equities, the longest streak of pro-stocks bias since the survey started asking the question in August of 2022.
Bond yields are approaching a key level that could potentially disrupt the equity rally, according to Morgan Stanley strategists.
“We view 4.35% on the 10-year US Treasury yield as an important technical level to watch for signs that rate sensitivity may increase for equities,” a team led by Michael Wilson wrote in a note.
In earnings, FedEx Corp.’s outlook on Thursday will provide hints on the state of the US economy after the bellwether previously forecast a slight revenue decline this fiscal year because of “volatile macroeconomic conditions.”
Nike Inc., Lululemon Athletica Inc., General Mills Inc., and Darden Restaurants Inc. results will show whether consumers are pulling back on spending or trading down, especially with inflation hanging around.
Corporate Highlights:
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Fisker Inc. is pausing production for the next six weeks as the electric-vehicle maker looks to rein in inventory and avoid possibly having to file for bankruptcy.
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B. Riley Financial Inc., the boutique investment bank under attack from short sellers about its dealings with a former business partner, failed to file its audited results after an extension period ended.
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The head of United Airlines Holdings Inc. told customers that the carrier is reviewing a series of recent mishaps involving its planes, promising any lessons learned would “inform our safety training and procedures” across the company.
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Barclays Plc is seeking to expand its relationships with sovereign wealth funds and private equity giants as part of its efforts to improve the profitability of its investment banking division by expanding in advisory and equity underwriting.
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The United Auto Workers is petitioning for a unionization vote at Volkswagen AG’s Tennessee plant, teeing up a crucial test of the recently reinvigorated labor group’s clout.
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Encyclopaedia Britannica Inc., the education technology company and publisher of books including the Merriam-Webster dictionary, is seeking a valuation of about $1 billion its initial public offering, according to people with knowledge of the matter.
Key events this week:
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Bank of Japan rate decision, Tuesday
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Germany ZEW survey expectations, Tuesday
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European Central Bank Vice President Luis de Guindos speaks, Tuesday
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US housing starts, Tuesday
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Eurozone consumer confidence, Wednesday
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Fed rate decision; Chair Jerome Powell holds news conference, Wednesday
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Reddit’s IPO, Wednesday
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ECB’s Christine Lagarde speaks, Wednesday
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Eurozone S&P Global Services PMI, S&P Global Manufacturing PMI, Thursday
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Bank of England rate decision, Thursday
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US Conference Board leading index, existing home sales, initial jobless claims, Thursday
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Nike, FedEx earnings, Thursday
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Japan CPI, Friday
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Germany IFO business climate, Friday
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Atlanta Fed President Raphael Bostic speaks, Friday
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ECB’s Robert Holzmann and Philip Lane speak, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 1.1% as of 11:01 a.m. New York time
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The Nasdaq 100 rose 1.7%
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The Dow Jones Industrial Average rose 0.4%
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The Stoxx Europe 600 fell 0.2%
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The MSCI World index rose 0.8%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0886
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The British pound was little changed at $1.2724
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The Japanese yen fell 0.2% to 149.28 per dollar
Cryptocurrencies
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Bitcoin fell 1.8% to $67,028.13
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Ether fell 3.2% to $3,517.7
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.33%
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Germany’s 10-year yield advanced two basis points to 2.46%
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Britain’s 10-year yield declined two basis points to 4.08%
Commodities
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West Texas Intermediate crude rose 0.9% to $81.79 a barrel
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Spot gold rose 0.1% to $2,158.51 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Craig Stirling, Felice Maranz, Kasia Klimasinska, Robert Fullem, Carter Johnson, Ye Xie and Michael Mackenzie.
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