Stocks Waver as Health-Care Names Rise; Bonds Gain: Markets Wrap

(Bloomberg) — US Treasury yields fell after data on Wednesday cemented bets that the Federal Reserve will lower interest rates later this month. Stocks wavered, kept off session lows by gains in the health-care sector on optimism after Pfizer Inc.’s deal with the White House.

The 10-year Treasury yield hovered around 4.12% after touching 4.08% earlier. The S&P 500 fluctuated between modest losses to negligible gains. Gold and the Bloomberg Dollar Spot Index were little changed.

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The ADP report on Wednesday showed payrolls at US companies unexpectedly dropped in September, consistent with other data over the past month indicating that the labor market is slowing. Traders accordingly added to bets on two more Fed rate cuts this year. After markets opened, data showed US factory activity shrank in September for a seventh straight month.

The US government shutdown is threatening a blackout in crucial economic data that the Fed needs to make its decisions, which would make economists and policymakers rely more on private reports like the ones on Wednesday. The JOLTS report on Tuesday signaled that demand for workers is slowing, giving traders a snapshot of the labor market at a time the Bureau of Labor Statistics’ nonfarm payrolls data will likely be delayed.

Given all this information, some investors don’t think the absence of Friday’s report will derail the Fed.

“We believe that even if the September nonfarm payroll report cannot be published before the Fed meeting, officials will have enough information about the labor market to deliver another 25bp ‘insurance’ cut at the October meeting,” said Atakan Bakiskan, US Economist at Berenberg.

Others are also looking at previous shutdowns to determine that such events often don’t last long and often have a negligible macroeconomic impact.

“What sets this shutdown apart is the threat of permanent layoffs for non-essential federal staff, which, while possibly political bluster and subject to legal challenges, could prolong the drag on public sector payrolls,” Thomas Ryan, North America economist at Capital Economics, wrote in a note.

Stuart Kaiser, Citigroup’s head of US equity trading strategy, doesn’t really see the shutdown hurting stocks for now.

“For this to really impact equity markets you’re going to need it to last for a while, you’re going to need to see pretty large layoffs or something happen in the bond market to spill over into the equity market,” he said on Bloomberg Television on Wednesday.

That said, on the long term, the government shutdown could magnify concerns about US policy stability, Lauren Goodwin, economist and chief market strategist at New York Life Investments, wrote in a note.

“Investors can operate under a simple rule of thumb: the longer a shutdown lasts, the greater its effects on consumer confidence, economic activity, and market outcomes,” she said.

Key Corporate News:

Amazon.com Inc. launched a private-label brand that offers a range of grocery items largely priced below $5 in a bid to attract inflation-stung shoppers. Peloton Interactive Inc. overhauled its hardware lineup and raised prices, some of the first major moves under new management aimed at lifting the company out of a multi-year slump. The US is pushing for a change in global bank rules that would increase the burden on some of the euro-region’s largest lenders, setting the stage for a clash with Europe’s most senior bank supervisors. Pfizer Inc. secured a reprieve from President Donald Trump’s long-threatened tariffs on the pharmaceutical industry Tuesday by agreeing to slash some of its drug prices by up to 85% and selling directly to the American public, a move other major drugmakers are expected to follow. BBVA SA’s €17 billion ($20 billion) takeover bid for Banco Sabadell SA was accepted by a major shareholder, providing a boost as Spain’s second-largest bank aims to get more than 50% of the rival’s shares. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.1% as of 11:38 a.m. New York time The Nasdaq 100 rose 0.1% The Dow Jones Industrial Average rose 0.2% The Stoxx Europe 600 rose 1.2% The MSCI World Index rose 0.2% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1732 The British pound rose 0.2% to $1.3478 The Japanese yen rose 0.5% to 147.14 per dollar Cryptocurrencies

Bitcoin rose 2.5% to $117,558.58 Ether rose 3.6% to $4,346.34 Bonds

The yield on 10-year Treasuries declined three basis points to 4.12% Germany’s 10-year yield was little changed at 2.71% Britain’s 10-year yield was little changed at 4.70% Commodities

West Texas Intermediate crude fell 0.7% to $61.94 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.

–With assistance from Andre Janse van Vuuren, Sujata Rao, Emily Graffeo, Isabelle Lee and Vildana Hajric.

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