(Bloomberg) – After a rally that propelled the market to multiple records this year, stocks are losing momentum and traders are also weighing mixed jobs data.
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The S&P 500 fell on the back of a downturn in technology, the most influential group. Warnings about an overbought market surfaced after the gauge rose 35% since early last year. The Nasdaq 100 fell 1%. Nvidia Corp. halted a six-day rally on Friday with heavy trading in expiring options. Tesla Inc.'s decline widened to 13% this week, and Broadcom Inc.'s soft chip sales slumped.
“There is absolutely no question that there has been a significant amount of 'foam' coming into the market in the short term,” said Matt Maley of Miller Tabak. Bring some cash and be a little more defensive. ”
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Earlier in the day, the highly anticipated jobs report showed the economy continued to add jobs without causing a spike in wages. The numbers reignited hopes that the Fed can achieve a soft landing that would allow officials to begin easing policies by the end of the year, but without risking too soon.
“The report wasn't necessarily a 'perfect' signal for the Fed, but it also didn't seem to contain anything that would derail its rate cut plans,” said E*Trade's Chris Larkin. Morgan Stanley.
The yield on the two-year Treasury note fell 2 basis points to 4.48%, with traders almost fully pricing in the Federal Reserve's quarter-point rate cut in June. The dollar recorded its longest losing streak since October. Gold hit new highs. Bitcoin at one point reached $70,000.
The U.S. unemployment rate rose to a two-year high in February even as employment remained healthy, showing that the labor market is cooling but resilient. Nonfarm payrolls increased by 275,000 last month, after being revised downward by a total of 167,000 in the previous two months. The unemployment rate rose to 3.9% and wage growth slowed.
The report was seen as “haphazard” by Principal Asset Management's Seema Shah and several other market observers. Nevertheless, Shah sees the broad numbers as somewhat positive for the market.
“If the economy can continue to add jobs without triggering a recovery in wage growth, the Fed will achieve a soft landing,” he said.
In other words, the report confirms that the labor market is strong but not overheated, meaning the Fed is on track to cut interest rates this year, says Sonu Varghese of Carson Group. he says.
“The labor force is doing well and wage inflation is turning around, so the Fed is taking a stab at that dual mandate,” said Jamie Cox of Harris Financial Group. “No one expected this outcome, but it is happening.”
Swap contracts anticipating the Fed's decision are repriced to lower interest rates, suggesting traders expect the Fed to ease by nearly 100 basis points by the end of the year. Last month, those contracts temporarily priced in less than 75 basis points of easing this year, down from more than 150 basis points seen in early 2024.
For Gina Bolvin of Bolvin Wealth Management Group, the biggest takeaway from Friday's numbers was the fact that the unemployment rate is increasing. She is among those who predict that if the unemployment rate reaches 4%, the Fed will be concerned and will be more likely to cut interest rates in June.
Charles Hepworth of GAM Investments said: “If you really think unemployment has bottomed out and is trending upwards and wage growth is slowing, then clearly the door is wide open for rate cuts. It will become.”
Chicago Fed President Austan Goolsby said Friday that he expects policymakers to cut interest rates this year as inflation cools further.
Federal Reserve Chairman Jerome Powell testified before lawmakers this week that he believes the labor market is “on the cusp of improving the balance between supply and demand.” He also suggested the central bank was nearing the confidence it needed to start cutting rates.
Ian Lingen of BMO Capital Markets said the weak wage statistics were noteworthy.
“At the very least, this latest update on wage inflation reflects Powell's message that the first cuts are on the way.”
About $4.4 billion was withdrawn from tech funds in the week ending March 6, Bank of America strategists led by Michael Hartnett wrote in a note, citing data from EPFR Global. . The outflow comes as Apple's stock entered a technical correction this month amid concerns about the company's weak iPhone sales and regulatory pressure.
Hartnett is more neutral on equities this year after remaining bearish in 2023, but says the stock market is experiencing an “abnormal rally” in “abnormal times.” Stated. This “expands and extends” its positioning ahead of expectations for an eventual rate cut by the Fed, he wrote in a note.
“The issue again is that we are seeing overbought/extended conditions at many levels and a significant disconnect between price action and momentum,'' said Dan Wantrowski of Janney Montgomery Scott. Stated. “This creates great vulnerability to a backlash in the coming weeks and months.”
Nvidia, the symbol of the artificial intelligence craze that has been driving the bull market, lost momentum on Friday. However, due to the rapid rise in stock prices this year, the stock price has significantly exceeded the level at the previous stock split. Some see the AI giant as well-positioned to do so again.
The company last announced a 4-for-1 stock split in May 2021, when the stock was trading at about $600 per share. The stock topped $900 earlier this week. According to a statement, NVIDIA's reason for the 2021 split was “to make it easier for investors and employees to own stock.”
Indeed, NVIDIA has shown no signs of splitting its stock anytime soon.
Company highlights:
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A United Airlines Holdings Inc. plane ran off a taxiway into grassland after landing in Houston on Friday, marking the third high-profile incident this week involving the company's Boeing aircraft.
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Apple, facing increasing pressure from European Union regulators, has reversed its decision to ban Fortnite maker Epic Games from offering its own iPhone app marketplace in the region.
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Taiwan Semiconductor Manufacturing Co., Ltd. (Taiwan Semiconductor Manufacturing Co., Ltd.) plans to secure more than $5 billion in federal grants to support semiconductor manufacturing projects in Arizona, officials said, in an effort to boost U.S. semiconductor manufacturing. This marks a major milestone in President Joe Biden's efforts to
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Huawei Technologies Co. and its partner Semiconductor Manufacturing International Inc. relied on U.S. technology to produce advanced chips in China last year, according to people familiar with the matter.
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Novo Nordisk A/S' blockbuster weight loss drug Wegoby has received expanded approval in the United States to include heart attack and stroke risk reduction.
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Eli Lilly's Alzheimer's drug donanemab faces further delays in gaining approval in the U.S., with regulators planning to hold hearings with outside advisers to examine the treatment's safety and effectiveness. ing.
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Gap Inc. reported better-than-expected fourth-quarter profits, showing that efforts to turn around the storied apparel retailer are bearing fruit.
The main movements in the market are:
stock
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As of 2:39 p.m. New York time, the S&P 500 was down 0.2%.
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Nasdaq 100 fell 0.9%
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The Dow Jones Industrial Average rose 0.3%.
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MSCI World Index little changed
currency
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The Bloomberg Dollar Spot Index fell 0.2%.
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The euro was almost unchanged at $1.0941.
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The British pound rose 0.4% to $1.2856.
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The Japanese yen rose 0.6% to 147.10 yen to the dollar.
cryptocurrency
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Bitcoin rose 1.9% to $68,589.4.
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Ether rises 1% to $3,912.22
bond
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The 10-year government bond yield was almost unchanged at 4.09%.
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Germany's 10-year bond yield fell 4 basis points to 2.27%.
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UK 10-year bond yields fell 2 basis points to 3.98%.
merchandise
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West Texas Intermediate crude oil fell 1.1% to $78.04 a barrel.
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Spot gold rose 0.8% to $2,177.20 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Felice Marantz, Liz Capo McCormick, Elizabeth Stanton, and Carmen Reinicke.
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