(Bloomberg) — The stock market is heading for its highest level in about a month, with a rebound intensifying on expectations that the U.S. Federal Reserve will cut interest rates by the end of the year.
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Stocks rose as a sharp increase in jobless claims strengthened expectations that the Federal Reserve would loosen policy. Stocks also rose after the company saw some demand for its $25 billion 30-year bond sale. The S&P 500 rose above 5,200, but volume was 20% below the past 30-day average. The stock's rise was also due to momentum-fueled commodity trading advisors being modeled to buy the stock this week.
“Our sense is that a rebound is not favored, mainly because the economic surprise has turned slightly negative, which could lead to further upside in the near term,” said Chris Seniec of Wolf Research. We believe that this is high.” “We expect the outlook to remain positive as we move into the end of the year.”
Leuthold's Doug Ramsey says it's not out of the question for the S&P 500 to rise another 10%, at least statistically. He analyzed 80 years of data on bull market rallies, focusing on bull market rallies that occurred when unemployment was this low and the economic cycle was this mature. If the current rally meets previous records in length and height, the S&P 500 will end the year at 5,705.
The S&P 500 was less than 1% off its all-time high. Megacaps were mixed, with Amazon.com rising and Nvidia falling. The 10-year Treasury yield fell 3 basis points to 4.47%.
Sterling faltered after Bank of England chief economist Hugh Pill said the central bank was “not yet there” in cutting interest rates, despite growing confidence it could start easing policy soon.
Wolf Research's Seniek said he remains positive on the stock market unless the economy shows signs of entering a recession or inflation rises to the point where markets start pricing in Fed rate hikes.
“Neither is in our base case!” Seniek concluded.
U.S. claims for unemployment benefits rose last week to the highest level since August, more than expected. Fed officials are watching labor demand and wage growth closely as they debate when is the right time to cut interest rates.
“Time will tell whether this is a temporary thing or part of a more serious cooling of the labor market,” said Chris Larkin of Morgan Stanley's E*Trade. “Investors may be comfortable with the idea that the Fed will wait until September to cut rates, but that doesn't mean they're comfortable waiting indefinitely.”
Blackstone President John Gray said economic growth will slow as stubborn inflation weighs on the Fed's ability to begin lowering borrowing costs.
“We are seeing a slowdown in growth,” Mr Gray told the Macquarie Australia conference in Sydney. “Central banks will be slow to cut interest rates because they don't want inflation to rise,” he said. “The Fed will be patient. There will be an opportunity to cut rates once this year,” he added.
If the economy slows, unemployment rises, inflation recedes and the Fed is expected to cut interest rates, there will be plenty of buyers for U.S. Treasuries and Treasuries, according to Joe Kalish of Ned Davis Research. will do.
“But don't get me wrong. As circumstances change, prices can change quickly as well.”
Kalish noted that bond buyers are different now than they were in the era of quantitative easing. Currently, buyers are price-sensitive and the burden falls primarily on household budgets, he added.
“There's always a price to pay to clear the market,” he noted. “So now we're just negotiating the price.”
Company highlights:
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Arm Holdings Inc.'s weak sales outlook for the current fiscal year has raised concerns that the tech industry's growth in artificial intelligence spending is slowing.
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Gaming giant Roblox Inc. reported lower-than-analyst forecasts for bookings, the latest sign of broader struggles in the video game industry.
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Google's parent company Alphabet is in talks to acquire marketing software provider HubSpot, according to people familiar with the matter.
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Ten people were injured when a 30-year-old Boeing 737 skidded off the runway in Senegal's capital Dakar, the country's transport minister said.
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Home rental company Airbnb fell after it provided a lackluster outlook for the second straight quarter, showing growth in travel spending slowing ahead of the peak summer season.
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Warner Bros. Discovery Chief Executive David Zaslav has tasked his staff with finding further cost-cutting opportunities to meet financial goals for the next few years, according to people familiar with the matter.
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Robinhood Markets on Wednesday posted its second straight quarterly profit, as rising interest rates and crypto trading helped boost revenue growth.
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Duolingo Inc.'s stock fell after the education software provider's quarterly report showed it added new users at its slowest pace since the third quarter of 2022.
This week's main events:
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UK industrial production, GDP, Friday
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ECB releases report of April policy meeting on Friday
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BOE Chief Economist Hugh Pill speaks on Friday
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University of Michigan Consumer Sentiment, Friday
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Chicago Fed President Austan Goolsby speaks on Friday
The main movements in the market are:
stock
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As of 1:12 p.m. New York time, the S&P 500 was up 0.4%.
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Nasdaq 100 rose 0.2%
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The Dow Jones Industrial Average rose 0.6%.
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MSCI World Index rose 0.3%
currency
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The Bloomberg Dollar Spot Index fell 0.2%.
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The euro rose 0.3% to $1.0778.
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The British pound rose 0.2% to $1.2521.
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The Japanese yen remained almost unchanged at 155.57 yen to the dollar.
cryptocurrency
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Bitcoin rose 0.6% to $61,968.15
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Ether rose 1.6% to $2,999.29
bond
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The 10-year Treasury yield fell 3 basis points to 4.47%.
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Germany's 10-year bond yield rose 3 basis points to 2.50%.
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UK 10-year bond yield is almost unchanged at 4.14%
merchandise
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West Texas Intermediate crude rose 0.3% to $79.19 per barrel.
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Spot gold rose 1% to $2,331.90 an ounce.
This article was produced in partnership with Bloomberg Automation.
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