Dip Buyers Wade Back In to Fuel Wall Street Gains: Markets Wrap

(Bloomberg) — A renewed wave of dip buying sent stocks and bonds higher, following a slide triggered by an unexpected pickup in US inflation.

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As investors awaited the next few economic reports that will be key in shaping the Federal Reserve’s rate path, Treasuries rebounded — led by gains in shorter maturities. Equities closed near session highs. Nvidia Corp. topped Alphabet Inc.’s market value as the chip giant’s rally shows no signs of cooling. Wall Street’s so-called fear gauge — the VIX — tumbled after a surge fueled by a reset in traders’ rate-cut wagers.

“The stock market never moves higher without fits and starts along the way,” said Jeremy Straub at Coastal Wealth. “The economy remains strong and isn’t in need of lower interest rates, which is ultimately supportive of stock prices.”

The S&P 500 reclaimed its 5,000 mark, while the Nasdaq 100 added 1.2%. In late hours, Cisco Systems Inc., the largest maker of computer networking equipment, announced plans to cut thousands of jobs after a slowdown in corporate tech spending wiped out its sales growth. US 10-year yields fell six basis points to 4.26%. Bitcoin climbed above $51,000.

Traders continued to keep an eye on Fedspeak a day after data showed the consumer price index rose by more than forecast.

Fed Bank of Chicago President Austan Goolsbee said slightly higher inflation data for a few months would still be consistent with a path back to the central bank’s goal. He also emphasized it’s important not to judge the inflation trend from one month’s number and that the Fed’s 2% target is based on the personal consumption expenditures price index — not CPI. He noted that the two metrics can differ “somewhat significantly.”

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Fed Vice Chair for Supervision Michael Barr said US policymakers need to see more data indicating inflation is heading back to 2% before they start cutting rates. 

“The ‘hot’ inflation data do not change our base case for a soft landing of slower growth, falling inflation, and 100bps of Fed rate cuts this year, likely starting in the second quarter,” said Solita Marcelli at UBS Global Wealth Management. “But we are continuing to monitor the incoming data and the start of rate cuts could be delayed should the economic prints remain strong.”

To Chris Senyek at Wolfe Research, the market remains a “show me” story. 

“For the overall market to experience an official correction, we believe investors will need to see additional evidence that the Fed won’t cut in-line with expectations and/or the growth outlook is decelerating fast enough to spark recession fears,” he noted.

Corporate Highlights:

• Uber Technologies Inc. will buy back as much as $7 billion in shares to return capital to shareholders after reporting its first full year of operating profit and consistent positive free cash flow in 2023.
• Bristol Myers Squibb sold $13 billion of bonds to help finance its acquisitions of Karuna Therapeutics Inc. and RayzeBio Inc., a deal that gathered orders exceeding $85 billion, according to a person with knowledge of the matter.
• Airbnb Inc. ended 2023 stronger than analysts’ had expected but suggested that demand in the current quarter wouldn’t be as robust as the last.
• Robinhood Markets Inc. reported revenue that topped estimates and executives said deposit growth is outpacing that of last year.

Key Events This Week:

• Japan GDP, industrial production, Thursday
• US Empire manufacturing, initial jobless claims, industrial production, retail sales, business inventories, Thursday
• ECB President Christine Lagarde speaks, Thursday
• Atlanta Fed President Raphael Bostic speaks, Thursday
• Fed Governor Christopher Waller speaks, Thursday
• ECB chief economist Philip Lane speaks, Thursday
• US housing starts, PPI, University of Michigan consumer sentiment, Friday
• San Francisco Fed President Mary Daly speaks, Friday
• Fed Vice Chair for Supervision Michael Barr speaks, Friday
• ECB executive board member Isabel Schnabel speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1% as of 4 p.m. New York time
• The Nasdaq 100 rose 1.2%
• The Dow Jones Industrial Average rose 0.4%
• The MSCI World index rose 0.7%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.0727
• The British pound fell 0.2% to $1.2564
• The Japanese yen rose 0.1% to 150.60 per dollar

Cryptocurrencies

• Bitcoin rose 4.2% to $51,661.01
• Ether rose 5% to $2,763.94

Bonds

• The yield on 10-year Treasuries declined six basis points to 4.26%
• Germany’s 10-year yield declined six basis points to 2.34%
• Britain’s 10-year yield declined 11 basis points to 4.04%

Commodities

• West Texas Intermediate crude fell 1.6% to $76.62 a barrel
• Spot gold fell 0.1% to $1,990.66 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Edward Bolingbroke and Garfield Reynolds.

©2024 Bloomberg L.P.