Stocks climbed after jobless claims data showed some signs the labour market is cooling, which is one of the key factors Federal Reserve officials are watching to decide on whether they will be able to notch down their aggressive tightening campaign.
The rebound in the S&P 500 followed a five-day selloff that put the index on the cusp of breaking an important technical indicator: its average price of the past 100 days. Bonds also reversed course on Thursday, with 10-year yields on the rise and approaching the 3.5 per cent mark. Oil rallied as an outage on a major U.S. oil pipeline and optimism over China’s reopening propelled prices higher.
Recurring applications for U.S. unemployment benefits rose to the highest since early February, suggesting that Americans who are losing their job are having more trouble finding a new one. Traders are now waiting Friday’s producer price index for November — one of the final pieces of data Fed policymakers will see before their Dec. 13-14 policy meeting. The PPI in October cooled more than expected.
“It’s interesting to see jobless claims rising slightly, but in all likelihood this won’t move the market needle too much,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “Investors will have a lot to digest these next few days as they get a clearer picture of where we stand in the fight against inflation before the Fed decision. The market is largely expecting the slowdown in rate hikes to begin next week, but whether the pivot will be enough to steer the economy into a soft landing remains the question.”
Strategists from Morgan Stanley to JPMorgan Chase & Co. have warned investors against piling back into risk on hopes the Fed is getting close to pivoting to easier policy.
“Presumably if the Fed is pivoting this time around, it’s not for a good reason. It’s a deteriorating fundamental picture,” Joyce Chang, chair of global research at JPMorgan, said in an interview with Bloomberg Television. “I mean, is that really a reason to be buying risk? I think it’s premature to say that there is a Fed pivot.”
Key events this week:
- US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.4 per cent as of 9:30 a.m. New York time
- The Nasdaq 100 rose 0.4 per cent
- The Dow Jones Industrial Average rose 0.3 per cent
- The Stoxx Europe 600 fell 0.3 per cent
- The MSCI World index rose 0.4 per cent
Currencies
- The Bloomberg Dollar Spot Index fell 0.1 per cent
- The euro rose 0.2 per cent to $1.0530
- The British pound was little changed at $1.2212
- The Japanese yen was little changed at 136.61 per dollar
Cryptocurrencies
- Bitcoin rose 0.1 per cent to $16,852.68
- Ether rose 1 per cent to $1,244.01
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.48 per cent
- Germany’s 10-year yield advanced five basis points to 1.83 per cent
- Britain’s 10-year yield advanced five basis points to 3.10 per cent
Commodities
- West Texas Intermediate crude rose 2.8 per cent to $74.01 a barrel
- Gold futures rose 0.3 per cent to $1,802.50 an ounce
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