Sun, October 17, 2021

business

Stocks rebound, Treasurys fall ahead of jobs data


Stocks rebounded from Mondays rout and Treasuries fell as investors assessed the state of the economy before a key payroll report Friday.

The S&P 500 and Nasdaq 100 gained -- led by advances in megacap tech names -- while the 10-year yield spiked to 1.53%. Investors are anxiously awaiting the latest labor market data for a signal on the Federal Reserve's next move. An ISM reading on the U.S. services sector activity came in better than expected Tuesday, likely keeping the Fed on track to announce a pullback in bond-buying.

The gains helped ease concerns of a market correction as the S&P 500 rose back above its 100-day moving average. A wall of worry has been building amid elevated inflation, fading recovery indicators, a spreading energy crisis, and U.S. political bickering. The Nasdaq 100's gain came after a measure of its relative strength fell to the lowest since March.

"While some parts of the stock market have declined more than others, we still have a ways to go before reaching an actual correction in the major stock indexes," said David Bahnsen, chief investment officer at Newport Beach, California-based wealth management firm The Bahnsen Group. "It is impossible to get overly worried about these incredibly modest market declines, which are mostly concentrated in highly overpriced technology stocks."

The S&P 500 information technology sector is down about 6% from a high in August as rising inflation and Treasury yields have prompted a rotation out of high-growth companies trading at a premium. Meanwhile, the energy sector is up 17% from a low in September as Europe braces for a winter energy crunch. European natural gas contracts soared on Tuesday to an unprecedented 114 euros per megawatt-hour, compared with 15.49 euros in February. Crude oil in New York also gained for a fourth day.

"I think we're going to most likely continue this pattern of pretty rapid sector shifts," said Liz Ann Sonders, chief investment strategist at Charles Schwab. "You've got these rotational corrections that have been happening under the surface, and yes, the deterioration has been more significant recently in the Nasdaq, but throughout the course of this year, you've seen various periods where breadth deterioration was more severe in areas like the Nasdaq or small cap."

The latest Fed commentary ahead of the U.S. nonfarm-payrolls data came on Monday from St. Louis Fed President James Bullard who said elevated price pressures may be changing the mentality of businesses and consumers by making them more accustomed to higher inflation.

"The non-farm payrolls report will be released on Friday and will give us a sense of how the Delta variant has impacted the employment environment," said Lauren Goodwin, economist and portfolio strategist at New York Life Investments. "We don't expect the report to have a meaningful market impact; covid-19 cases are also on the decline again, and Federal Reserve communication points to reducing their market support as long as the report is 'decent.'"

The dollar rose, rebounding from a three-day sell-off. Bitcoin extended a rally, surpassing the $50,000 mark. And equities in Europe and Hong Kong rose, while those in Japan fell.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

- The S&P 500 rose 1.1% as of 4:01 p.m. EDT

- The Nasdaq 100 rose 1.4%

- The Dow Jones industrial average rose 0.9%

- The MSCI World index rose 0.7%

Currencies

- The Bloomberg Dollar Spot Index rose 0.2%

- The euro fell 0.2% to $1.1599

- The British pound rose 0.1% to $1.3625

- The Japanese yen fell 0.5% to 111.46 per dollar

Bonds

- The yield on 10-year Treasurys advanced five basis points to 1.53%

- Germany's 10-year yield advanced three basis points to -0.19%

- Britain's 10-year yield advanced seven basis points to 1.08%

Commodities

- West Texas Intermediate crude rose 2.1% to $79.22 a barrel

- Gold futures fell 0.4% to $1,761.10 an ounce

Published : October 06, 2021