Stocks Rally, Bonds Fall on Push to End Shutdown: Markets Wrap
(Bloomberg) — Stocks rallied and yields rose as optimism that US lawmakers are moving closer toward a deal to end the government shutdown spurred demand for risky assets.
S&P 500 futures advanced 0.9% after a group of Senate Democrats broke with their party to help Republicans move forward on a funding bill. Nasdaq 100 contracts climbed 1.5%. Nvidia Corp. rose more than 3% in premarket trading, leading gains among the Magnificent Seven tech stocks.
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Monday’s optimistic tone offered relief after a volatile week, when worries over stretched valuations fueled a sharp selloff in the biggest winners of the artificial-intelligence boom. Ending the shutdown would give investors greater clarity on key economic data such as jobs and inflation, helping to lift the fog around the outlook for interest rates.
“Markets are taking very positively to the news of the potential resolution of the US shutdown,” said Marija Veitmane, head of equity research at State Street Global Markets. “We were very constructive on the market anyway and we saw last week’s selloff as a little bit of a buying opportunity.”
The risk-on mood spread across markets, lifting oil, metals and Bitcoin. Europe’s Stoxx 600 was on track for its biggest gain since June. US Treasuries fell across the curve, pushing the 10-year yield up four basis points to 4.13%. Gold also advanced on prospects of a Federal Reserve rate cut next month.
With the third-quarter reporting season nearly complete, profits are rising at their fastest pace in four years, keeping strategists upbeat on the outlook.
Strategists at UBS Group AG expect the S&P 500 to climb to 7,500 next year on the back of solid earnings growth, implying an 11% gain from current levels. Their peers at Morgan Stanley, meanwhile, see clear signs of a recovery in corporate profits.
How soon the shutdown will end remains uncertain. The Senate has yet to schedule a final vote, while the measure must also pass the House before reaching President Donald Trump for his signature.
“It’s only the opening act in what could still be a drawn-out political drama, but investors are seizing on any sign of progress,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “They need to understand where the US economy stands, where inflation and jobs are headed and what the Fed should do next.”
Despite the buoyant sentiment, some investors remain cautious that volatility could linger amid weakening consumer confidence, jitters in debt markets and ongoing questions over tech valuations.
On Monday, Taiwan Semiconductor Manufacturing Co. reported slower monthly revenue growth, underscoring uncertainty about the sustainability of the AI boom.
The near-term resumption of economic data releases may also reveal a less rosy picture than expected, while the quality of inflation reports could be in doubt after the Bureau of Labor Statistics halted in-person data collection.
“What I’m really watching at the moment is the data for jobs and the risk of negative newsflow on that front,” said Fabien Benchetrit, head of target allocation for France and southern Europe at BNP Paribas Asset Management. “The second major risk moving forward is that the massive capex deployed on AI doesn’t deliver the expected boost in sales and earnings.”
Corporate News:
Verizon Communications Inc. kicks off five-part bond sale to help fund Frontier Communications Parent Inc. deal. Robinhood Markets Inc. shares rose 4% in premarket trading after Chief Executive Officer Vlad Tenev told the Financial Times that the platform plans to give amateur investors access to private artificial-intelligence companies. Cryptocurrency-linked stocks are rallying amid risk-on sentiment as lawmakers move closer to a deal to reopen the US government. Health insurer stocks slipped. Novo Nordisk A/S shares rose after the Danish drugmaker withdrew from a takeover battle for obesity drug developer Metsera Inc., prompting relief among some investors that it won’t be spending $10 billion on an unproven asset. Diageo Plc surged in London. The maker of Johnie Walker named Dave Lewis, known for his turnaround of UK grocer Tesco, as chief executive officer as it seeks a reboot of its own. European buyout firm Investindustrial is in advanced talks to buy TreeHouse Foods Inc., the private-label food manufacturer, for about $3 billion including debt, according to people familiar with the matter. Permira is nearing an agreement to acquire JTC Plc, the London-listed provider of fund solutions and corporate services, according to people familiar with the matter. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.9% as of 8:24 a.m. New York time Nasdaq 100 futures rose 1.5% Futures on the Dow Jones Industrial Average rose 0.4% The Stoxx Europe 600 rose 1.4% The MSCI World Index rose 0.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1577 The British pound rose 0.2% to $1.3186 The Japanese yen fell 0.4% to 154.09 per dollar Cryptocurrencies
Bitcoin rose 1.5% to $106,084.23 Ether rose 0.4% to $3,596.83 Bonds
The yield on 10-year Treasuries advanced four basis points to 4.13% Germany’s 10-year yield advanced one basis point to 2.68% Britain’s 10-year yield advanced one basis point to 4.48% Commodities
West Texas Intermediate crude rose 0.5% to $60.03 a barrel Spot gold rose 2.5% to $4,102.88 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Subrat Patnaik, Julien Ponthus and Sagarika Jaisinghani.
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