(Bloomberg) — A rally in the world’s largest technology companies propped up stocks. Treasuries barely budged after a $69 billion two-year auction that kicked off this week’s trio of note sales.
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The S&P 500 edged up, while the tech-heavy Nasdaq 100 outperformed as Nvidia Corp. rallied 5% after a $430 billion plunge. US yields remained slightly higher as the government sale got the expected yield and good demand. Wednesday’s $70 billion five-year sale will say more about underlying demand for Treasuries at these yields.
US Treasury Two-Year Note Bidder Participation History (Table)
US consumer confidence eased on a more muted outlook for business conditions, the job market and incomes. Fed Governor Michelle Bowman said she sees a number of upside risks to the inflation outlook. Her colleague Lisa Cook said it will be appropriate to reduce rates “at some point,” adding that she expects inflation to improve gradually this year before more rapid progress in 2025.
“We believe the bull market we are in isn’t going to be derailed until either we go into recession or the Fed changes interest-rate policy from potential cuts to actual hikes,” said Chris Zaccarelli at Independent Advisor Alliance. “Expect volatility between now and the end of the year, but don’t expect the bull market to end without a change in the economy or Fed posture.”
The S&P 500 hovered around 5,450. Carnival Corp. jumped on a bullish outlook. Transportation stocks will face a crucial test late Tuesday when FedEx Corp. reports results that will shed light on the strength of the US economy.
The yield on 10-year Treasuries advanced two basis points to 4.25%. Bitcoin topped $61,000. The loonie fluctuated as inflation unexpectedly surged in Canada, a setback for policymakers as they weigh further rate cuts next month.
Investors are likely to keep piling into US stocks at the sign of any pullback as the Fed edges closer to reducing interest rates, according to Societe Generale SA, which anticipates the easing cycle will begin in early 2025.
Even after a roughly 15% rally year-to-date, strategists led by Manish Kabra expect the S&P 500 to “stay in buy-the-dip mode, with the next upleg coming closer to a Fed rate-cutting cycle.”
Bank of America Corp. said clients were net sellers of US equities for the first time in a month last week, with outflows led by hedge funds and institutions as retail investors snapped up shares.
Outflows by BofA clients totaled net $1.6 billion in the week ended June 21, quantitative strategists led by Jill Carey Hall said Tuesday in a note to clients. At the sector level, technology and communications services led inflows. Financials saw the largest outflows.
Commodity Trading Advisors, or CTAs, are estimated to hold $130 billion worth of long positions in global equities, after selling $29 billion last week, and are likely to sell more in every market scenario this week, according to Goldman Sachs Group Inc.
Equity derivatives and flows specialist Cullen Morgan estimates that CTAs would sell $36 billion of equities, including $2.8 billion of S&P 500 futures, this week in a falling market, and $15 billion of stocks in a flat market. Even if stocks were to rise, they are expected to sell $3 billion of stocks.
Nvidia’s recent selloff isn’t reflective of a worsening outlook for tech or the broader market, as other demand signals are positive, according to UBS.
“Nvidia’s correction shouldn’t be mistaken as a warning signal on either the structural investment case for AI or the broader equity outlook,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management
To Neuberger Berman Group’s Steve Eisman, the chipmaker’s three-day plunge is no more than a blip.
The senior portfolio manager, best known for his short bet against subprime mortgages ahead of the global financial crisis, owns “a lot” of the chipmaker’s shares and considers it a long-term play that’s going to be relevant for years to come, he said Tuesday in an an interview on Bloomberg Television.
Corporate Highlights:
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Exxon Mobil Corp. took the first step toward what will be its seventh oil project in Guyana, a clear signal the supermajor intends to expand crude output from the South American nation into the next decade.
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Boeing Co. has offered to acquire Spirit AeroSystems Holdings Inc. for about $35 a share in a deal funded mostly with stock, according to people familiar with the matter.
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Airbus SE is coming up short on the millions of parts that make up the company’s commercial aircraft, and the situation is getting worse rather than better for the world’s largest planemaker.
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Microsoft Corp. risks a hefty European Union fine after regulators accused the company of abusing its market power by bundling the Teams video-conferencing app to its other business software.
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OpenAI is taking additional steps to curb China’s access to artificial intelligence software, enforcing an existing policy to block users in nations outside of the territory it supports.
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AbbVie Inc. failed to win approval for a new Parkinson’s disease drug after US regulators found problems at a third-party manufacturing facility.
Key events this week:
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US new home sales, Wednesday
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China industrial profits, Thursday
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Eurozone economic confidence, consumer confidence, Thursday
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US durable goods, initial jobless claims, GDP, Thursday
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Nike releases earnings, Thursday
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Japan Tokyo CPI, unemployment, industrial production, Friday
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US PCE inflation, spending and income, University of Michigan consumer sentiment, Friday
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Fed’s Thomas Barkin speaks, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.1% as of 1:22 p.m. New York time
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The Nasdaq 100 rose 0.8%
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The Dow Jones Industrial Average fell 0.8%
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The MSCI World Index rose 0.1%
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.2% to $1.0708
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The British pound was little changed at $1.2682
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The Japanese yen was little changed at 159.68 per dollar
Cryptocurrencies
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Bitcoin rose 3.7% to $61,665.76
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Ether rose 2.6% to $3,395.33
Bonds
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The yield on 10-year Treasuries advanced two basis points to 4.25%
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Germany’s 10-year yield was little changed at 2.41%
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Britain’s 10-year yield was little changed at 4.08%
Commodities
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West Texas Intermediate crude fell 0.8% to $81.01 a barrel
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Spot gold fell 0.7% to $2,318.03 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Alex Nicholson, Jeran Wittenstein, Ryan Vlastelica, Alexandra Semenova, Aya Wagatsuma and Jason Scott.
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