(Bloomberg) — The selloff in stocks and bonds got a reprieve Wednesday as traders parsed US data and increased bets that the Federal Reserve can refrain from further interest rate increases.
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Tesla Inc. was at the forefront of a climb in large-cap tech names that also included Microsoft Corp. and Amazon.com Inc. Gains in the tech sector drove a tentative rebound, pushing the Nasdaq 100 and S&P 500 indexes higher after the latter ended Tuesday at a four-month low. Ten-year Treasury yields were lower on the day after the rate on the benchmark touched a high of 4.88% during Asian trading hours. Traders are now pricing a less than one-in-five chance of an increase in November, down from one-in-three previously.
The bounce higher was bolstered by data showing US companies added the fewest number of jobs since the start of 2021 in September, suggesting labor demand in several industries is slowing.
Private payrolls rose 89,000 last month after climbing 180,000 in August, according to the survey from the ADP Research Institute in collaboration with Stanford Digital Economy Lab. The Institute for Supply Management’s services index pulled back modestly in September falling to 53.6, the lowest level this year, though readings above 50 indicate expansion.
“Stock investors have been hoping the labor market will loosen up and give the Fed enough breathing room to dial down its hawkishness,” said Mike Loewengart, head of model portfolio construction at the Morgan Stanley Global Investment Office. “ADP isn’t necessarily a reliable predictor of the government’s monthly jobs data, but if Friday’s report also shows the labor market is cooling, stock investors may worry a little less about indefinitely higher interest rates.”
The latest leg of the selloff has been fueled by Tuesday’s better-than-expected US job data, as well as a slew of hawkish comments from Federal Reserve officials. As conviction grew that US interest rates could rise further from current 22-year highs, 30-year yields touched 5% for the first time since 2007.
Volatility could make another appearance when Friday’s payrolls numbers hit as traders search for signs that the economy is cooling off and the Fed can pull back from its hawkish higher-for-longer messaging.
The dollar slumped against its Group-of-10 peers for the first time in three days. Crude futures dropped and gold slid.
“Recent developments support our view that markets had become overly confident in pricing a rapid easing of the Fed’s monetary policy,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management. “While we expect equity and bond market conditions to improve, we forecast choppy and rangebound trading in equity markets in the near term.”
Key events this week:
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China has week-long holiday
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France industrial production, Thursday
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BOE Deputy Governor Ben Broadbent, Riksbank First Deputy Governor Anna Breman participate at panel discussion, Thursday
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US trade, initial jobless claims, Thursday
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San Francisco Fed President Mary Daly speaks at the Economic Club of New York, Thursday
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Germany factory orders, Friday
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US unemployment rate, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.3% as of 1:36 p.m. New York time
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The Nasdaq 100 rose 0.9%
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The Dow Jones Industrial Average was little changed
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index fell 0.1%
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The euro rose 0.4% to $1.0505
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The British pound rose 0.5% to $1.2139
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The Japanese yen was little changed at 149.01 per dollar
Cryptocurrencies
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Bitcoin rose 0.5% to $27,533.5
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Ether fell 1.1% to $1,639.18
Bonds
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The yield on 10-year Treasuries declined five basis points to 4.74%
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Germany’s 10-year yield declined five basis points to 2.92%
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Britain’s 10-year yield declined two basis points to 4.58%
Commodities
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West Texas Intermediate crude fell 4.6% to $85.10 a barrel
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Gold futures fell 0.3% to $1,835.50 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher, Macarena Muñoz, Sujata Rao, Michael Msika and Tatiana Darie.
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