Stock Buyer Fatigue Kicks In as Bond Yields Rise: Markets Wrap

(Bloomberg) — A strong week on Wall Street ended on a quiet note, with stocks holding near all-time highs and bonds falling as consumer data did little to alter bets the Federal Reserve will cut rates in September.

Following a relentless surge, the S&P 500 barely budged. The IPO market kicked into high gear this week, with deals raising over $4 billion in the busiest period since 2021. A gauge of megacaps jumped Friday, led by Tesla Inc. Shares of vaccine makers slumped on a report health officials plan to link Covid shots to the deaths of around two dozen children.

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A modest slide in Treasuries trimmed an advance that sent the market to its fourth straight up week. The dollar saw its biggest weekly slide in about a month.

Consumer sentiment hit the lowest since May and long-term inflation expectations rose. That follows recent data painting a picture of a slowing labor market, with investors leaning heavily in the direction of three rate cuts this year.

“The Fed is pulled in opposite directions by rising inflation on the one hand and a weak job market on the other,” said Bill Adams at Comerica Bank. “The Fed can be expected to cut rates further in coming months; the question is how much, not if.”

Cracks in the job market will likely prompt the Fed to execute a series of rate reductions beginning next week, according to economists surveyed by Bloomberg News. The median respondent sees two cuts by year-end, but a sizable minority — more than 40% — anticipates three reductions.

Deutsche Bank AG economists now see three rate reductions in 2025. They previously expected officials led by Fed Chair Jerome Powell would cut this month and wait to ease again until December.

At Morgan Stanley, economists including Michael Gapen expect four straight rate cuts. Beyond January, they see officials pausing to assess inflationary impacts. Once that “noise” clears, they we anticipate further reductions in April and July.

And what about Fed guidance?

Strategists at TD Securities say that’s likely to “lean dovish” next week as a result of labor-market conditions — but not overly so given an inflation overshoot remains an important risk.

They believe the September Summary of Economic Projections will reflect this, continuing to show two cuts in 2025, while shifting data projections in a “slightly hawkish direction.”

“The market is unlikely to be surprised by the cut,” said Oscar Munoz and Gennadiy Goldberg at TD Securities. “However, the likely reluctance of Chair Powell and the dots to commit to future cuts could be interpreted as less dovish.”

That could lead rates and the curve to reverse some recent momentum, they noted.

“We’re anticipating a 25 basis-point rate cut and expect that the tone of the statement, press conference, and SEP will be interpreted as net dovish,” said Ian Lyngen at BMO Capital Markets.

As Powell restarts the “normalization process,” Lyngen anticipates that the 2025 dot plot will be lowered to reflect the potential for a 25 basis-point cut at both the October and December meetings.

Financial markets are betting the Fed will still be “ahead of the curve” when it starts lowering borrowing costs, according to Bank of America Corp.’s Michael Hartnett.

The strategist pointed to a rally in banks and rate-sensitive stocks as well as a drop in investment-grade credit spreads, which suggests investors are “saying the Fed can cut with credibility and is cutting into US growth re-acceleration,” he said.

Still, cash drew the bulk of inflows in the past week, bringing the four-week total to $266 billion, BofA said, citing EPFR Global data. US stocks saw outflows of $19 billion.

With the Fed poised to cut rates next week and market sentiment still far from complacent, the path of least resistance remains higher for equities in the near term, according to Mark Hackett at Nationwide.

“Rate cuts would add to a growing list of tailwinds, from the stimulative budget deal and trade agreements to the earnings boost from a weaker dollar,” he said.

This week’s flood of IPO deals became a barometer for just how frothy the stock market was getting. All offerings saw strong demand in the formal marketing process before trading began, with many selling bigger stakes than they had initially offered. The median listing opened 31% above the offer price, data compiled by Bloomberg show.

Even with September’s strong start, the IPO market is still recovering from what was seen before the pandemic. Roughly $29 billion has been raised on US exchanges through Sept. 12, the data compiled by Bloomberg show. That lags an average of $31.4 billion in the decade before 2020’s boom and pales in comparison to the manic years during the pandemic.

Corporate Highlights:

The leader of Tesla Inc.’s board said no one other than Elon Musk is capable of running the company as it expands beyond electric vehicles into artificial intelligence and robotics. Apple Inc. delayed the launch of its new iPhone Air in mainland China, citing regulatory approval issues. Microsoft Corp. avoided a hefty antitrust penalty as the European Union accepted its commitments to settle a probe into the alleged illegal bundling of its Teams video-conferencing app. The US Federal Trade Commission is investigating whether Amazon.com Inc. and Alphabet Inc.’s Google misled advertisers that place ads on their websites, according to people familiar with the matter. OpenAI said it’s closer to converting into a more traditional for-profit company — nearing the resolution of painful negotiations with top shareholder Microsoft and outlining terms of at least $100 billion in equity for its nonprofit arm. The leaders of OpenAI and Nvidia Corp. plan to pledge support for billions of dollars in UK data center investments when they head to the country next week at the same time as President Donald Trump, according to people with knowledge of the matter. The Federal Aviation Administration said it would fine Boeing Co. $3.1 million for safety violations uncovered over a space of several months between late 2023 and early last year. Boeing ’s St. Louis-area defense workers will remain on strike after they rejected a third contract offer from management. Tylenol-maker Kenvue Inc. spoke with Health Secretary Robert F. Kennedy Jr. in a bid to keep the over-the-counter painkiller off a list of autism-causing treatments. Union Pacific Corp.’s CEO discussed the railroad’s proposed $72 billion acquisition of rival Norfolk Southern Corp. with Trump as the company seeks regulatory approval for the deal. Exxon Mobil Corp. said it has invented a new form of graphite that can increase the life of electric-vehicle batteries by as much as 30%. Gemini Space Station Inc. jumped in its trading debut after the cryptocurrency exchange led by the billionaire Winklevoss twins raised $425 million in a packed week for US listings. WisdomTree Inc. launched its first tokenized fund that gives investors exposure to private credit, marking the latest attempt by Wall Street to connect fast-growing markets with blockchain technology. One of Banco Sabadell SA’s largest shareholders said he won’t accept BBVA SA’s $18 billion takeover bid at the current price, putting more pressure on the prospective buyer to improve it. Ocado Group Plc tumbled after Kroger Co. questioned the future of their partnership, raising concerns that the major US grocer could close some existing automated warehouses to cut costs. SK Hynix Inc. jumped after the company announced it had completed development of HBM4, the next generation of high-bandwidth memory crucial for artificial-intelligence work. What Bloomberg Strategists say…

“The S&P 500 is still trading in a ‘good news’ regime, rallying on weak lagging/coincident data that accelerates Fed cuts, or on forward-looking signals pointing to brighter prospects. Such regimes often support equities for extended periods, but they have also preceded prior market peaks.”

—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.

Some of the main moves in markets:

Stocks

The S&P 500 was little changed as of 4 p.m. New York time The Nasdaq 100 rose 0.4% The Dow Jones Industrial Average fell 0.6% The MSCI World Index was little changed Bloomberg Magnificent 7 Total Return Index rose 1.7% The Russell 2000 Index fell 1% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1736 The British pound fell 0.1% to $1.3560 The Japanese yen fell 0.3% to 147.58 per dollar Cryptocurrencies

Bitcoin rose 2% to $116,666.12 Ether rose 5.5% to $4,661.77 Bonds

The yield on 10-year Treasuries advanced four basis points to 4.06% Germany’s 10-year yield advanced six basis points to 2.72% Britain’s 10-year yield advanced six basis points to 4.67% The yield on 2-year Treasuries advanced one basis point to 3.56% The yield on 30-year Treasuries advanced two basis points to 4.68% Commodities

West Texas Intermediate crude rose 0.2% to $62.51 a barrel Spot gold rose 0.3% to $3,644.92 an ounce ©2025 Bloomberg L.P.