(Bloomberg) — Treasury yields fell as Jerome Powell’s remarks bolstered confidence the Federal Reserve will be able to cut interest rates this year.
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Fed Chair Powell said prices are now showing disinflation trend. Just a few days ahead of the US payrolls report, a reading on job openings — also known as JOLTS — is expected to show further softening in labor conditions. While that could reinforce Wall Street’s bets on rate cuts, equity investors are hoping the report is not excessively cool, which could raise concern the economy is at risk at a time when inflation is running above the Fed’s 2% target.
“Investors will be looking for a ‘cool’ but not too-soft JOLTS headline to help reinforce expectations for a September Fed rate cut,” said Tom Essaye at The Sevens Report. “Beyond the economic data, market focus will be on Fedspeak. A dovish tone from the Fed chair would be well received and likely influence risk-on money flows. Any hawkish surprises have the potential to spark volatility.”
Treasury 10-year yields declined five basis points to 4.41%. The S&P 500 hovered near 5,470. Tesla Inc. rallied after its deliveries beat estimates.
The S&P 500 will rally to new peaks by the end of the year as economic strength outweighs market risks, according to RBC Capital Markets strategist Lori Calvasina.
She raised her year-end target to 5,700 from 5,300 — among the highest on the street. That implies a gain of about 4% from the most recent close. Still, Calvasina noted risks and referred to her target hike as a “nervous raise.” The market has “gotten a bit ahead of itself” in terms of valuations and some sentiment metrics.
Deutsche Bank AG strategists expect US earnings to rise by an above-average 13% for the second quarter, driven by megacap growth and tech stocks. The outlook is for a sixth straight quarter of above average beats. However, the team led by Binky Chadha expects market reaction to be subdued as stocks have rallied in the run-up to the season.
The record-setting surge in US equities, driven chiefly by American technology behemoths, is once again igniting comparisons to prior boom-and bust cycles on Wall Street. But parallels to the dot-com era and stock-market frenzies of the past are so far exaggerated, if history is any guide.
While the S&P 500 has posted an 85% advance since 2019, even despite some drawdowns over the period, major bull runs of the 20th century dwarf that return. The US stock benchmark soared 220% in the last five years of the Internet bubble at the turn of the century, according to Bloomberg Intelligence data, and 238% in the same-period stretch of the Roaring Twenties.
Corporate Highlights:
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Novo Nordisk A/S and Eli Lilly & Co. shares fell after Joe Biden demanded price cuts on their blockbuster drugs for diabetes and weight loss.
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Moderna Inc. secured nearly $200 million from the US government to speed development of an mRNA vaccine for pandemic influenza as a dangerous strain of bird flu sweeps through the nation’s dairy farms, fueling concern about a budding health crisis.
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Northern Data AG is speaking with potential advisers about a US initial public offering of its combined artificial intelligence cloud computing and data center businesses, according to people familiar with the matter.
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BYD Co. will work with French car-leasing firm Ayvens SA to expand its presence in Europe, in a deal that gives the Chinese electric-car maker better access to the region’s lucrative corporate market.
Key events this week:
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China Caixin services PMI, Wednesday
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Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
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US Fed minutes, ADP employment, ISM Services, factory orders, initial jobless claims, durable goods, Wednesday
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Fed’s John Williams speaks, Wednesday
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UK general election, Thursday
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US Independence Day holiday, Thursday
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Eurozone retail sales, Friday
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US jobs report, Friday
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Fed’s John Williams speaks, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.1% as of 9:39 a.m. New York time
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The Nasdaq 100 was little changed
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The Dow Jones Industrial Average was little changed
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The Stoxx Europe 600 fell 0.7%
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The MSCI World Index was little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was unchanged at $1.0740
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The British pound rose 0.2% to $1.2675
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The Japanese yen was little changed at 161.32 per dollar
Cryptocurrencies
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Bitcoin fell 0.6% to $62,883.56
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Ether fell 0.4% to $3,449.9
Bonds
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The yield on 10-year Treasuries declined five basis points to 4.41%
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Germany’s 10-year yield declined four basis points to 2.57%
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Britain’s 10-year yield declined seven basis points to 4.21%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Robert Brand, Julien Ponthus, Aya Wagatsuma and Alexandra Semenova.
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