Stock market rally shakes little hawkish Powell: markets fall back

(Bloomberg) — Stocks rallied in the final minutes of U.S. trading, even after Federal Reserve Chairman Jerome Powell signaled he was in no rush to make further rate cuts of interest.

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Powell said the central bank would lower interest rates over time, while again emphasizing that the overall economy remained on solid footing. The S&P 500 closed the third quarter with a rise of more than $2.5 trillion, ignoring the cautious stance of central bankers.

Despite the weakness earlier in the day, the S&P 500 posted its fourth straight quarter of gains, the longest winning streak since 2021. The tech-heavy Nasdaq 100 posted a similar advance.

The bull market survived the weakest quarter of the year, the third quarter, and it is likely to remain intact at least until the end of the year, as earnings remain strong, interest rates fall and consumers continue to spend, said Emily Bowersock. Hill at Bowersock Capital Partners.

“We expect the fourth quarter to be quite similar to the third quarter – high volatility, but with a strong finish,” she added.

Meanwhile, the world's largest bond market posted a historic gain after Powells' comments. Treasury yields were higher, led by policy-sensitive two-year bonds, which traded around 3.64% after Powell said the U.S. did not yet have the data necessary to convene the November meeting.

Nonetheless, Treasury debt returned 1.4% this month through Friday, as measured by the Bloomberg US Treasury Total Return Index. If this advance continues, it will be the market's longest streak of monthly gains since 2010.

Powell was a bit hawkish at the margins, but the Fed still has a lot of trimming to do, according to Vital Knowledge's Adam Crisafulli. The Fed chair's remarks appear to suggest that markets should consider a half-point cut instead of three-quarters of a point for the rest of the year, he added.

Swaps traders limited their bets on a fall in rates, which had been closing in on a three-quarter point move before the U.S. opening.

Powell won't end the 25 basis points versus 50 basis points debate this afternoon. Or at least it's highly unlikely, BMO's Ian Lyngen wrote in a note before the meeting. Friday's jobs report is the main event this week, he said, adding that Tuesday's August JOLTS numbers should reinforce the idea that a cooling labor market has become the new standard.

The story continues

While weighing the Fed's rate cut prospects, investors face a cocktail of risks, including growing tensions in the Middle East and a looming dockworkers' strike at critical U.S. ports on Tuesday.

Chicago Fed President Austan Goolsbee expressed concerns about a supply shock if a strike drags on. That will increase the cost of doing business and lead to shortages, he told Fox Business.

Separately, the Atlanta Fed's Raphael Bostic told Reuters he was open to another half-point easing at the November central bank meeting if upcoming data showed growth of employment slower than expected.

For Goldman Sachs Group Inc. strategists led by David Kostin, a strong release Friday could help fuel risk-on bets and encourage investors to shift away from expensive, quality stocks and into lower-quality, less expensive companies. appreciated.

European stocks fell about 1% after Jeep maker Stellantis NV cut its profit margin forecast. On Friday, Volkswagen AG issued its second profit warning in three months. Ford Motor Co. and General Motors Co. fell in U.S. trading.

That contrasted with the mood in China, where the CSI 300 index jumped as much as 9.1%, the highest since 2008, fueled by the stimulus package.

Company Highlights

Verizon Communications Inc., the largest U.S. wireless carrier, has agreed to sell thousands of cell towers to digital infrastructure company Vertical Bridge.

DirecTV and Dish have agreed to partner in a deal that will create the largest pay TV provider in the United States.

REA Group Ltd. has given up its pursuit of Rightmove Plc after being repeatedly rejected by the British property portal.

Key events this week:

Atlanta Fed President Raphael Bostic, Fed Governor Lisa Cook, Richmond Fed President Thomas Barkin and Boston Fed President Susan Collins are attending the conference Tuesday.

Among ECB policymakers, Olli Rehn, Luis de Guindos, Isabel Schnabel and Joachim Nagel spoke on Tuesday.

BOE chief economist Huw Pill speaks to the Confederation of British Industry's economic growth council on Tuesday.

The Bank of Japan publishes a summary of its opinions for September on Tuesday

South Korea CPI and S&P Global Manufacturing PMI on Wednesday

Fed speakers include Thomas Barkin of Richmond, Beth Hammack of Cleveland, Alberto Musalem of St. Louis and Fed Governor Michelle Bowman on Wednesday.

Nonfarm jobs in the United States, Friday

Some of the main market movements:

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The S&P 500 rose 0.4% as of 4:02 p.m. New York time

The Nasdaq 100 rose 0.3%

The Dow Jones Industrial Average was little changed

The MSCI World index fell 0.2%

Currencies

The Bloomberg Dollar Spot Index rose 0.3%

The euro fell 0.3% to $1.1133

Sterling was little changed at $1.3371.

The Japanese yen fell 1% to 143.68 per dollar

Cryptocurrencies

Bitcoin fell 3.5% to $63,554.51

Ether fell 2.4% to $2,598.86

Bonds

The 10-year Treasury yield rose four basis points to 3.79%

The German 10-year yield fell one basis point to 2.12%

The UK 10-year yield rose three basis points to 4.00%

Raw materials

West Texas Intermediate crude was little changed

Spot gold fell 1% to $2,631.75 an ounce

This story was produced with the help of Bloomberg Automation.

–With assistance from Michael Mackenzie, Sagarika Jaisinghani, Kit Rees, Margaryta Kirakosian and Catherine Bosley.

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