Tuesday, September 21, 2021

business

Cyclicals beat tech in run-up to key jobs report


Stocks rose ahead of Fridays jobs data that will shape bets on the path of interest rates and the Federal Reserves massive bond-buying program. The dollar retreated.

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The S&P 500 traded at a fresh record, with gains in commodity and industrial shares offsetting technology losses. The U.S. probably added 725,000 jobs in August -- a more moderate pace compared to each of the prior two months, but stronger than gains seen early this year. Atlanta Federal Reserve President Raphael Bostic said "we're going to let the economy continue to run until we see signs of inflation," before stepping in on rates.

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."

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 leader board for the first half of 2021, they've lagged in recent months as the delta coronavirus variant prompted concerns about the pace of the 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%.

Some corporate highlights:

- Virgin Galactic Holdings Inc. tumbled as the U.S. Federal Aviation Administration won't allow the company to fly its space plane until an investigation is complete into whether a July 11 flight deviation threatens public safety.

- Cryptocurrency-exposed stocks rose, 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.

- 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.

Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 4 p.m. EDT

The Nasdaq 100 was little changed

The Dow Jones industrial average rose 0.4%

The MSCI World index rose 0.3%

Currencies

The Bloomberg Dollar Spot Index fell 0.3%

The euro rose 0.3% to $1.1874

The British pound rose 0.5% to $1.3836

The Japanese yen was little changed at 109.94 per dollar

Bonds

The yield on 10-year Treasurys declined one basis point to 1.28%

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 1.6% to $69.72 a barrel

Gold futures fell 0.2% to $1,811.80 an ounce

Published : September 03, 2021