Stocks Pause Amid Valuation Concerns; Dollar Dips: Markets Wrap

(Bloomberg) — US index futures and European stocks paused at the end of an up-and-down week dominated by speculation about the sustainability of the blistering global equity rally.

Contracts on the S&P 500 drifted, with the gauge on track for a modest weekly gain after it closed at record highs twice before pulling back the next day. Intel Corp. gained in premarket trading after the US government-backed chipmaker introduced new products and manufacturing technology.

The Stoxx Europe 600 benchmark was little changed, with France’s CAC 40 index rising as President Emmanuel Macron continued his search for a new prime minister capable of holding together a fragile budget accord among rival lawmakers.

The dollar slipped after a four-day rally as an deal to end the war in Gaza took shape. Gold held most of Thursday’s sharp decline, while crude oil fell for a second day. Treasury yields dipped.

The equity rally is taking a breather after a robust rebound from April lows, as investors reassess stretched valuations in the tech sector against the backdrop of easier Federal Reserve policy and a resilient economy. Traders are looking to the upcoming earnings season to reveal whether share prices have run ahead of fundamentals.

“Dips in the equity complex should still be viewed as buying opportunities, with the path of least resistance continuing to lead higher amid resilient underlying economic growth, robust earnings growth, and a looser Fed policy backdrop,” said Michael Brown, senior research strategist at Pepperstone Group Ltd.

While tech has led the way in the S&P 500’s rebound, other sectors such as electrical equipment makers and construction firms, have also benefited from AI spending, broadening the rally, according to Wolf von Rotberg, an equity strategist at Bank J Safra Sarasin. But with the benchmark now at its most expensive in almost 25 years, based on the estimated price-to-earnings ratio, valuations are looking too rich for comfort, he said.

“Even though the AI narrative has been undisrupted lately, we would caution against chasing the market after such a strong rally and at these valuations,” Von Rotberg said.

Meanwhile, the yen extended gains against the dollar after Japan’s ruling coalition collapsed Friday. Nikkei 225 futures in Singapore fell and Japanese bond futures rose.

Elsewhere, the Argentine peso rebounded after the US rushed to stabilize the country’s economy, offering $20 billion in financing and carrying out a rare intervention in currency markets after weeks of sharp declines.

Corporate News:

Stellantis NV shares rose after the carmaker reported that third-quarter deliveries climbed 13% on surging sales in North America. Apple Inc. is preparing to expand the roles of some top executives in response to the pending departure of longtime Chief Operating Officer Jeff Williams. SoftBank Group Corp. is in talks to borrow $5 billion from global banks, refilling its coffers at a time Masayoshi Son is accelerating the Japanese investment firm’s bets on artificial intelligence. Some of the main moves in markets:

Stocks

The Stoxx Europe 600 was little changed as of 9:30 a.m. London time S&P 500 futures rose 0.1% Nasdaq 100 futures rose 0.2% Futures on the Dow Jones Industrial Average rose 0.1% The MSCI Asia Pacific Index fell 0.8% The MSCI Emerging Markets Index fell 0.5% Currencies

The Bloomberg Dollar Spot Index fell 0.2% The euro rose 0.2% to $1.1587 The Japanese yen rose 0.3% to 152.65 per dollar The offshore yuan rose 0.2% to 7.1265 per dollar The British pound was little changed at $1.3302 Cryptocurrencies

Bitcoin rose 0.1% to $121,329.58 Ether was little changed at $4,337.27 Bonds

The yield on 10-year Treasuries declined three basis points to 4.11% Germany’s 10-year yield declined two basis points to 2.68% Britain’s 10-year yield declined three basis points to 4.72% Commodities

Brent crude fell 0.2% to $65.09 a barrel Spot gold rose 0.2% to $3,985.94 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Anand Krishnamoorthy.

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