(Bloomberg) — U.S. stocks edged higher and bond yields steadied as traders analyzed comments from Federal Reserve policymakers and saw room for further easing after last week’s half-point interest rate cut.
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The S&P 500 rose 0.2%, trading in a tight range after manufacturing data and comments from Federal Reserve officials. Among individual stocks, Intel shares rose 3.4% after it was reported that Apollo Global Management had offered to invest billions of dollars in the chipmaker. Constellation Energy led gains in power stocks after its Microsoft deal was well received by analysts.
Data showing U.S. business activity remains strong even as growth slows has stoked confidence that the world’s largest economy can achieve a soft landing. Data released on Monday showed U.S. business activity expanded at a slightly slower pace in early September, but expectations worsened and the received prices index rose to a six-month high.
“This is a somewhat inconclusive report and therefore doesn’t dramatically change Fed expectations,” said Adam Crisafulli of Vital Knowledge. “The preliminary PMIs suggest that the U.S. economy is in pretty healthy shape, especially compared to Europe.”
Traders are betting on almost three-quarters of a percentage point of policy easing by the end of the year, suggesting at least one more big rate cut is on the way.
Chicago Fed President Austan Goolsbee said that with inflation approaching the central bank’s target, the focus should shift to the labor market, “which will probably mean more rate cuts over the next 12 months.”
Minneapolis Fed President Neel Kashkari also cited weakness in the labor market and supports another half-percentage-point cut by the end of the year. Atlanta Fed President Raphael Bostic took a more moderate stance. Bostic said starting the central bank’s rate-cutting cycle with big steps would help move rates closer to neutral, but officials shouldn’t make big moves in succession.
Later this week investors will get data on the Fed’s preferred price gauge as well as U.S. consumer spending data on Friday.
The yield on the policy-sensitive two-year Treasury note fell to 3.57%, while longer-dated notes were little changed. Treasuries were under pressure as the Treasury plans to frontload a $183 billion auction and issue up to $25 billion in new bonds this week.
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“The Fed’s first rate cut since 2020 is historic and may have many investors wondering, ‘What’s next?'” said Chris Larkin of Morgan Stanley’s E*Trade. “Attention will likely remain on economic growth, and particularly the job market.”
In Europe, the euro fell while European stocks rose slightly after weak French and German purchasing managers’ indexes (PMIs) showed the euro zone’s private economy contracted for the first time since March.
The common currency fell as much as 0.7 percent against the dollar amid growing expectations of more aggressive interest rate cuts from the European Central Bank.
“The market is starting to demand more aggressive rate cuts, especially if you look at what the Fed has done so far,” Mariya Baitmane, senior multi-asset strategist at State Street, said on Bloomberg Television. The ECB is “definitely lagging behind.”
Company Highlights:
Apollo Global Management LLC has offered to invest billions of dollars in Intel Corp. as a vote of confidence in the chipmaker’s turnaround strategy, according to people familiar with the matter.
Brookfield Asset Management raised an initial $2.4 billion for a fund focused on investing in clean energy and transition assets in emerging markets, about halfway to its target.
Palantir Technologies co-founder and CEO Alex Karp has a love-hate relationship with Wall Street: He says analysts don’t understand the company and he prefers the group of retail investors loyal to Palantir.
StandardAero Inc. is seeking to raise $1.1 billion in an initial public offering after its backer, The Carlyle Group, decided to pursue a public listing rather than a sale of the aircraft maintenance services provider.
BNP Paribas has agreed to buy HSBC Holdings Plc’s German private banking business, aiming to gain a bigger share of the country’s fast-growing asset management market.
UniCredit SpA Chief Executive Officer Andrea Orsel has more than doubled his stake in Commerzbank AG, a dramatic development that could increase tensions with the German government.
Meanwhile, in Asian markets, speculation grew that China might announce new stimulus measures after it cut short-term policy interest rates and scheduled an unprecedented economic briefing for Tuesday.
Gold hit a new record high as the worsening Middle East conflict spurred expectations that the safe haven asset would rally even further. U.S. oil and gas stocks performed well.
Major events this week:
Australian interest rate decision, Tuesday
Nippon Jibun Bank Manufacturing PMI, Services PMI, Tuesday
Mexican CPI, Tuesday
Bank of Canada Governor Tiff Macklem speaks Tuesday
Australian Consumer Price Index, Wednesday
China medium-term lending rate, Wednesday
Sweden’s interest rate decision Wednesday
Swiss interest rate decision on Thursday
ECB President Christine Lagarde to speak on Thursday
US jobless claims, durable goods and GDP revised Thursday
Federal Reserve Chairman Jerome Powell delivered a pre-recorded speech at the 10th U.S. Treasury Market Conference on Thursday.
Mexico interest rate decision Thursday
Japan Tokyo Consumer Price Index, Friday
China industrial profits, Friday
Eurozone consumer confidence on Friday
US PCE, University of Michigan Consumer Confidence, Friday
Some of the key market developments:
stock
The S&P 500 was up 0.2% as of 2:39 p.m. New York time.
The Nasdaq 100 rose 0.3%.
The Dow Jones Industrial Average rose 0.2%.
The MSCI World Index rose 0.3%.
currency
The Bloomberg Dollar Spot Index was little changed.
The euro fell 0.4% to $1.1122.
The British pound rose 0.2% to $1.3351.
The Japanese yen rose 0.4% to 143.31 to the dollar.
Cryptocurrency
Bitcoin rose 0.4% to $63,488.66.
Ether rose 4.2% to $2,681.18.
Bonds
The yield on the 10-year Treasury note was little changed at 3.74%.
German 10-year government bond yields fell 5 basis points to 2.16%.
UK 10-year government bond yields rose 2 basis points to 3.92%.
merchandise
West Texas Intermediate crude fell 0.9% to $70.39 a barrel.
Spot gold rose 0.2% to $2,627.84 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Alyce Andres, Margaryta Kirakosian, Alex Nicholson, John Viljoen, Catherine Bosley, and Alice Gledhill.
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