Stocks Fall for 3rd Day as New Data Adds to Woes: Markets Wrap

(Bloomberg) — U.S. stocks sank after jobs data showed the Federal Reserve has more room to raise interest rates to curb inflation, a decision echoed by several central bank officials in recent days.

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The S&P 500 and tech-heavy Nasdaq 100 fell for a third straight day. Bonds fell after an unexpected rebound in August, consumer confidence sparked a discount and pushed the two-year interest rate to a new multi-year high.

Three regional Fed presidents, in separate remarks on Tuesday, reiterated Chairman Jerome Powell’s intention to lower inflation. Swaps quoted at the Fed’s September meeting are now pricing in a more than 70% chance of a three-quarter percentage point increase. A jobs reading on Tuesday added that the labor market remains tight and wage pressures persist. Jobless claims will be released on Thursday ahead of Friday’s payrolls report.

“The fallout from Friday will make us very sensitive to a lot of the incoming data, especially around employment,” said Shawn Cruz, chief trading strategist at TD Ameritrade. “Not surprisingly, getting this consumer sentiment data today and the JOLTS data had quite a strong reaction in the markets. That’s probably all you should expect between now and the September Fed meeting, particularly anything related to employment. So this week is probably going to be a pretty volatile week.”

Analysts remain confused about what recent statements from Fed officials and upcoming data could mean for stocks. While Credit Suisse Group AG advised investors to go bearish on global stocks after the Jackson Hole symposium, strategists at JPMorgan Chase & Co. say a reading on the US labor market that portends bad news for the economy is actually a bullish signal for stocks.

Meanwhile, bonds are sliding into the first bear market in a generation, burning investors who erred on bets that central banks will back away from rapid rate hikes.

The Fed this week is also poised to accelerate the unwinding of its nearly $9 trillion balance sheet. The impact of quantitative tightening will be relatively benign for the first six to 12 months, but could begin to amplify its impact on the economy around the middle of next year, Jeff Schulze, chief investment strategist at ClearBridge Investments, said in an interview. .

Other risks range from China’s economic slowdown to an energy crisis that threatens to push Europe into recession as winter approaches.

Here are some key events to watch this week:

  • ECB Governing Council members are due to speak at the event from Tuesday to September 2

  • China PMI, Wednesday

  • Eurozone CPI, Wednesday

  • Russia’s Gazprom is set to halt gas flows on the Nord Stream pipeline for three days of maintenance on Wednesday

  • Cleveland Fed President Loretta Mester is scheduled to speak on Wednesday

  • China Caixin manufacturing PMI, Thursday

  • US non-farm payrolls, Friday

  • Voting for the UK leadership closes on Friday. The winner was announced on September 5th

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Some of the main movements in the markets:

inventories

  • The S&P 500 was down 1.4% at 1:30 p.m. New York time

  • The Nasdaq 100 fell 1.7%

  • The Dow Jones Industrial Average fell 1.2%

  • MSCI World index fell 1%

currency

  • The Bloomberg Dollar Spot index rose 0.2%

  • The euro rose 0.2% to $1.0020

  • The British pound fell 0.5% to $1.1652

  • The Japanese yen was slightly lower at 138.76 per dollar

Bindings

  • The 10-year bond yield rose one basis point to 3.11%

  • Germany’s 10-year yield was little changed at 1.51%

  • Britain’s 10-year yield rose 10 basis points to 2.70%

Goods

  • West Texas Intermediate crude fell 5.9% to $91.27 a barrel

  • Gold futures fell 0.8% to $1,735.40 an ounce

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