Stocks join bonds in decline as bets on Fed cut ease: Markets are mixed

(Bloomberg) — Stocks and bonds fell as data showed U.S. business activity accelerated amid a rebound in inflation, reinforcing bets that the Federal Reserve will remain inactive.

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The S&P 500 fell below 5,300, with all megacaps falling except Nvidia Corp. The chipmaking giant jumped more than 9% on a solid outlook, surpassing the all-time $1,000 mark. The Dow Jones Industrial Average lost 1.5%, led by a drop in Boeing Co. — which said it will continue to burn cash this quarter and for the full year. Treasury yields rose, with the move led by shorter maturities.

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Swaps now fully price in a full quarter-point rate cut in December, compared to November the day before. Activity growth at service providers this month was the fastest in a year and industrial production expanded at a faster pace. This resilience is making it difficult for inflation to cool down, helping to explain why the Fed wants to keep rates higher for longer.

“Fed members have indicated they want to see more progress on inflation – fortunately the US economy still appears robust enough to take an extended pause on rates,” said Don Rissmiller of Strategas Securities. “We continue to look for the Fed’s first rate cut in September.”

Two-year Treasury yields rose seven basis points to 4.94%. The dollar rose. Bitcoin fell more than 4%. Oil and gold retreated.

Earlier this month, US policymakers rallied around the desire to keep rates higher for longer and “many” questioned whether the policy was restrictive enough to bring inflation down to its target, in line with the Fed minutes released this week.

“The minutes are a reminder that while the Fed doesn’t see another rate hike as likely – and certainly doesn’t see it as a base case – it won’t rule out hikes if inflation doesn’t behave,” said Chris Low of FHN Financial . .

Meanwhile, another round of windfall profits from artificial intelligence darling Nvidia and the steady advance of the economy mean the S&P 500 likely has more room to climb, according to the trading desk at JPMorgan Chase & Co.

“With the AI ​​theme still playing out and the macro hypothesis intact, we will likely continue to make new highs,” the team, including head of US market intelligence Andrew Tyler, wrote in a note to clients.

The story continues

Main events this week:

• Japan CPI

• Retail sales in Canada

• Germany’s GDP

• US Durable Goods Consumer Sentiment Friday

• Fed’s Christopher Waller Speaks on Friday

Some market movements:

Actions

• The S&P 500 was down 0.7% at 4 p.m. New York time

• The Nasdaq 100 fell 0.4%

• The Dow Jones Industrial Average fell 1.5%

• The MSCI World index fell 0.6%

Coins

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.1% to $1.0809

• The British pound fell 0.2% to $1.2693

• The Japanese yen was little changed at 156.88 per dollar

Cryptocurrencies

• Bitcoin fell 4.3% to $66,428.35

• Ether fell 5.7% to $3,534.98

Titles

• The yield on the 10-year Treasury note rose five basis points to 4.48%

• Germany’s 10-year yield rose six basis points to 2.60%

• Britain’s 10-year yield rose three basis points to 4.26%

goods

• West Texas Intermediate crude fell 0.9% to $76.87 a barrel

• Spot gold fell 2% to $2,331.70 an ounce

This story was produced with help from Bloomberg Automation.

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