Stocks Drop, US Yields Top 4% as Rate-Cut Bets Ebb: Markets Wrap – Yahoo Finance

October 7, 2024

(Bloomberg) — Stocks fell and major Treasury yields rose above 4% after solid U.S. economic data undercut bets that the Federal Reserve will cut deep interest rates next month.

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S&P 500 contracts fell 0.4% and Nasdaq 100 futures fell 0.5%. Borrowing costs for 10-year U.S. Treasuries rose above 4% for the first time since August, widening the rise from Friday, when monthly U.S. payrolls rose above expectations. Swap markets had recently predicted a 50 basis point rate cut, but are now pricing in next month's rate cut to be less than a quarter of a percentage point.

Changes in interest rate expectations are likely to weigh on the stock market, which has recently soared to record highs on the back of a strong U.S. economy, easing inflation and signs of significant interest rate cuts. Additionally, oil prices rose, approaching $80 per barrel, as investors awaited Israel's response to recent Iranian missile attacks.

Marija Baitmane, head of equity strategy at State Street Global Markets, said she remains positive on the outlook for stocks as the economy continues to recover and inflation eases. But Baitmane said on Bloomberg TV: “We probably don't see a lot of aggressive rate cuts, so we have to be a little bit careful about the drivers.”

Investors are now focused on U.S. inflation data to be released on Thursday, with economists polled by Bloomberg expecting year-on-year price growth to slow slightly to 2.3% from the previous report. Earnings season begins this week, with reports from major U.S. banks being released. Revenue growth is solid, but is expected to slow from the second quarter.

Among individual stocks, Pfizer rose more than 2% in U.S. pre-market trading after Bloomberg reported that activist investor Starboard Value acquired about $1 billion in Pfizer stock. Arcadium lithium shares soared 29% on news that Rio Tinto had made a non-binding takeover approach.

Europe's Stoxx 600 stock index rose modestly and bond yields rose across the continent. The biggest movers were Heidelberg Materials, which benefited from reports that Adani Group had begun talks to buy its cement business in India, and gains following the announcement that it would sell online retailer YNAP to Mytheresa. It was Richemont, a luxury goods company. .

This week's main events include:

Eurozone finance ministers will meet in Luxembourg on Monday. ECB President Christine Lagarde also attended.
Minneapolis Fed President Neel Kashkari, Atlanta Fed President Rafael Bostic, St. Louis Fed President Alberto Moussalem, and Fed Director Michelle Bowman spoke at various events Monday to prepare investors for next month's meeting. are listening for clues to policymakers' thinking.
Brazil and Mexico release CPI data; New Zealand, Israel and India suspend interest rate decisions
US CPI for September, the last inflation figure before the presidential election, is expected to be released on Thursday
President Biden will embark on Thursday on a trip to Germany and Angola that will run until Oct. 15, his first overseas trip since withdrawing from the presidential race.
New York Fed President John Williams gives a keynote speech at Binghamton University in New York. Richmond Fed President Thomas Barkin discusses economic outlook in fireside chat Thursday