(Bloomberg) — Stocks climbed while bond yields sank as an unexpected inflation slowdown bolstered bets the Federal Reserve’s aggressive hiking cycle is now over — and its next move will be a cut in mid-2024.
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More than 95% of the S&P 500 companies rose, with the gauge up 2%. Tesla Inc. led gains in megacaps and Nvidia Corp. extended its rally into a 10th straight session. Financial shares also saw a big advance, especially regional banks — which climbed 6%. The Russell 2000 index of small caps jumped over 4% — the most in a year. Treasury two-year yields plunged about 20 basis points to 4.85%. The dollar fell 1%. Fed swaps priced in 50 basis points of easing in July.
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The so-called core consumer price index, which excludes food and energy costs, increased 0.2% from September, according to government figures. Economists favor the core gauge as a better indicator of underlying inflation than the overall CPI. That measure was little changed, restrained by cheaper gasoline.
To Chris Zaccarelli at Independent Advisor Alliance, whether or not the economy can stay out of recession remains to be seen, but the market should continue to rally as people begin to accept that higher rates are off the table — which should push stock and bond prices higher.
“The last of investors not convinced the Fed is done are likely throwing in the towel,” said Bryce Doty at Sit Fixed Income Advisors. “The next Fed action is more likely to be a cut next summer than another rate increase.”
The drop in inflation suggests that recent monetary policy has been doing its job and make the prospect of a soft landing ever more likely, according to Richard Flynn at Charles Schwab UK
“This good news reinforces the likelihood that central bankers will hold off from further rate hikes in this cycle, which is the direction they seem to be leaning in any case.”
“With the US economy holding up, the inflation data are ‘soft-landing nirvana’ for the equity markets,” said Neil Dutta, head of economics at Renaissance Macro Research.
“We need to see more months with soft inflation data, but the stock and bond market is celebrating today,” said Gina Bolvin, president of Bolvin Wealth Management Group. “We’re set up nicely for a year-end rally.”
Fedspeak
Traders will also keep an eye on another slew of Fed speakers throughout the day to get their thoughts on the latest data and how that would impact the central bank’s next steps, especially when it comes to the outlook for rate cuts.
Fed Bank of Richmond President Thomas Barkin said he’s not convinced inflation is on a clear path toward the central bank’s 2% target despite “real progress” curbing price pressures in recent months.
Bond giant Pacific Investment Management Co. — among the many whose expectations for a rally this year were disappointed — is renewing the call for 2024.
Bonds “have rarely been as attractive as they appear today” relative to stocks, Pimco managers Erin Browne, Geraldine Sundstrom and Emmanuel Sharef say in a new report predicting “prime time” for the asset class in 2024.
Investors turned the most bullish on bonds since the global financial crisis on “big conviction” that rates will move lower in 2024, according to the latest Bank of America Corp. fund manager survey. The poll showed investors were dumping cash to hold the biggest overweight position in bonds since 2009.
BofA’s Michael Hartnett said the “big change” was not the macro outlook, but expectations that inflation and yields will move lower in 2024.
Elsewhere, Bank of England Chief Economist Huw Pill said interest rates in the UK will need to remain in “restrictive” territory to choke off the risk that inflation persists. China plans to provide at least 1 trillion yuan ($137 billion) of low-cost financing to the nation’s urban village renovation and affordable housing programs in its latest effort to shore up the struggling property market, according to people familiar with the matter.
Corporate Highlights:
Snap Inc. climbed after the Information reported Amazon.com Inc. agreed to let its users shop for products directly from ads on the Snapchat app.
Home Depot Inc. narrowed its guidance for a decline in this year’s profit and revenue as home-improvement demand wanes.
Boeing Co. extended its successful order haul on the second day of the Dubai Air Show, winning a deal from Ethiopian Airlines for more narrow- and widebody aircraft while rival Airbus SE continued to chase an increasingly elusive deal with Emirates.
Glencore Plc will buy a majority stake in Teck Resources Ltd.’s coal business, ending a months-long saga that transfixed the mining industry and setting the stage for the commodity giant to exit the coal business itself.
Siemens Energy AG has secured a €15 billion ($16.2 billion) deal with the German government, its biggest shareholder Siemens AG and a consortium of banks, as the troubled manufacturer weathers massive losses at its wind-turbine unit.
Key events this week:
China retail sales, industrial production, fixed-asset investment, Wednesday
Japan GDP, industrial production, Wednesday
UK CPI, Wednesday
US retail sales, business inventories, PPI, Empire manufacturing, Wednesday
Target earnings, Wednesday
China new home prices, Thursday
US initial jobless claims, industrial production, Thursday
Walmart earnings, Thursday
US President Joe Biden and Chinese President Xi Jinping expected to speak at APEC leaders summit, Thursday
Cleveland Fed President Loretta Mester, New York Fed President John Williams and Fed vice chair for supervision Michael Barr speak, Thursday
Bank of England deputy governor Dave Ramsden and ECB President Christine Lagarde speak at event, Thursday
US housing starts, Friday
US Congress faces a midnight deadline to pass a federal spending measure, Friday
ECB President Christine Lagarde speaks, Friday
Chicago Fed President Austan Goolsbee, Boston Fed President Susan Collins and San Francisco Fed President Mary Daly speak, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 2% as of 10:38 a.m. New York time
The Nasdaq 100 rose 2.2%
The Dow Jones Industrial Average rose 1.5%
The Stoxx Europe 600 rose 1.5%
The MSCI World index rose 2%
Currencies
The Bloomberg Dollar Spot Index fell 0.9%
The euro rose 1.3% to $1.0836
The British pound rose 1.5% to $1.2468
The Japanese yen rose 0.6% to 150.83 per dollar
Cryptocurrencies
Bitcoin fell 1% to $36,119.65
Ether fell 1.2% to $2,035.61
Bonds
The yield on 10-year Treasuries declined 18 basis points to 4.46%
Germany’s 10-year yield declined 10 basis points to 2.61%
Britain’s 10-year yield declined 13 basis points to 4.18%
Commodities
West Texas Intermediate crude rose 1.8% to $79.65 a barrel
Spot gold rose 1% to $1,966.98 an ounce
This story was produced with the assistance of Bloomberg Automation.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
