(Bloomberg) — Stocks hovered near record highs as traders hoped for more clues about the Fed’s outlook as Federal Reserve Chairman Jerome Powell wrapped up a two-day congressional hearing.
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Stocks rose for a seventh straight day, putting the S&P 500 on track for its longest run of gains since November. Treasuries have steadied amid growing expectations that the Fed could ease policy this year. Indeed, swaps traders are pricing in around two quarter-point rate cuts in 2024, with roughly a 70% chance that the first cut will come at the Fed’s September meeting.
The central bank is considering cutting interest rates after keeping them at their highest level in more than two decades for nearly a year to tame inflation. Powell was careful not to signal to lawmakers on Tuesday when a cut might come, but he highlighted growing signs of a cooling in the job market after government data showed the unemployment rate rose for a third straight month.
“We expect him to deliver a similar tone to yesterday’s Senate testimony and market action today will primarily reflect pre-CPI positioning and the results of the 10-year bond auction,” said Will Comparnole of FHN Financial.
The S&P 500 is trading near 5,590. Nvidia and Tesla lead the large-cap gains. Advanced Micro Devices agrees to acquire Silo AI for $665 million in cash. Intuit cuts 1,800 employees, the latest major job cuts in the tech sector. 3M’s chief financial officer leaves for the same role at another company.
The yield on the 10-year Treasury note was little changed at 4.29%, ahead of a $39 billion U.S. Treasury auction.
Wall Street’s most prominent trading desk says investors should prepare for a possible break in the market’s recent eerie calm.
Options markets are forecasting that the S&P 500 could move 0.8% in either direction after Thursday’s CPI release, based on intraday at-the-money straddle prices, according to Stuart Kaiser, head of U.S. equity trading strategy at Citigroup Inc. If that happens, it would be the biggest move for the index since June 12, when the CPI and interest rate decision were last made.
Political uncertainty in the U.S., comments from the Fed chairman and the start of second-quarter earnings season could lead to increased market volatility in the coming days and weeks, according to Mark Haefele of UBS Global Wealth Management.
With the Federal Reserve on pause, banks’ largest source of revenue is also on pause.
The big four banks’ net interest income – the difference between the profits they make on their assets and what they pay on their liabilities – hit a record last year as interest rates rose, but analysts expect it to fall for a second straight quarter when banks start reporting second-quarter results.
JPMorgan Chase & Co. and Citigroup Inc. report bank earnings on Friday. Market-making activity was mixed, with stock trading outpacing bond trading.
Company Highlights:
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Microsoft and Apple have abandoned plans to join OpenAI’s board of directors in a surprising decision that underscores growing regulatory scrutiny of big tech companies’ influence over artificial intelligence.
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Honeywell International Inc. has agreed to acquire Air Products & Chemicals Co.’s liquefied natural gas processing technology and equipment business for $1.81 billion in cash.
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Samsung Electronics believes adding AI capabilities will be key to reclaiming its position as the world’s leading maker of foldable smartphones, mobile chief TM Lo said on the eve of the company’s latest model launch.
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Samsung’s largest union, representing more than 30,000 workers, has declared an indefinite strike, a surprising move that increases the risk of production disruptions.
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Major events this week:
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U.S. Consumer Price Index, Initial Jobless Claims Thursday
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Federal Reserve Presidents Raphael Bostic and Alberto Mussallem to speak Thursday
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China trade, Friday
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University of Michigan Consumer Sentiment Index, U.S. Producer Price Index, Friday
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Citigroup, JPMorgan and Wells Fargo to report earnings on Friday
Some of the key market developments:
stock
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The S&P 500 was up 0.3% as of 9:47 a.m. New York time.
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The Nasdaq 100 rose 0.4%.
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The Dow Jones Industrial Average was little changed
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The Stoxx Europe 600 index rose 0.5%
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The MSCI World Index rose 0.3%.
currency
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The Bloomberg Dollar Spot Index was little changed.
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The euro rose 0.1% to $1.0824.
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The British pound rose 0.4% to $1.2834.
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The Japanese yen weakened 0.2% to 161.58 yen to the dollar.
Cryptocurrency
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Bitcoin fell 0.3% to $57,774.68.
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Ether rose 1% to $3,101.7.
Bonds
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The yield on the 10-year Treasury note was little changed at 4.29%.
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German 10-year government bond yields fell 5 basis points to 2.53%.
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UK 10-year government bond yields fell 3 basis points to 4.13%.
merchandise
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West Texas Intermediate crude fell 0.4% to $81.12 a barrel.
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Spot gold rose 0.8% to $2,382.67 an ounce.
This story was produced with assistance from Bloomberg Automation.
–With assistance from Cecile Gutscher, Richard Henderson, Joel Leon, and Jessica Menton.
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