Falling buys fuel equities gains as tech rebounds: markets envelop

(Bloomberg) – The dropping buying crowd has returned to stock markets amid speculation the worst sell-off since May has gone too far.

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Stocks increased their gains as tech stocks rebounded, although the advance in the S&P 500 was led by defensive industries such as utilities and consumer staples. The dollar hit its highest level since November 2020, while Treasuries fluctuated.

Federal Reserve Chairman Jerome Powell and his counterparts at the European Central Bank, the Bank of Japan and the Bank of England on Wednesday expressed cautious optimism that supply chain disruptions making increasing inflation rates around the world would end up being temporary. Traders remained alert to the potential for market disruption if politicians in Washington failed to raise the debt ceiling in time to avoid a default on US bonds.

“Falling buyers are in force to boost stocks,” said Fiona Cincotta, senior financial markets analyst at City Index. “While stocks are up today, the outlook is less clear. The nervousness surrounding high levels of inflation and slowing growth is expected to persist for some time. Discussions over the US debt ceiling could be the focus of discussions in a calm economic calendar. “

The US Treasury is expected to run out of borrowing capacity by the end of October, according to the Congressional Budget Office, in the latest warning to lawmakers following their unsuccessful efforts to tackle the debt ceiling this week.

QuickTake: What is the debt ceiling and will the United States raise it?

A majority of investors fear continued high inflation, with a 20% drop in stocks considered more likely than a 20% recovery, according to a Citigroup Inc. survey of customers. While most of the modest gains expected next year in the S&P 500, price pressures and a Fed policy reversal are big risks, according to survey this month of more than 90 funds pensions, mutuals and hedge funds.

An indicator of pending US home sales rebounded in August to a seven-month high as potential buyers welcomed more attractive prices and additional inventory. The figures suggest that real estate activity is strengthening after declining from record levels last year.

Some highlights of the company:

  • Walgreens Boots Alliance Inc. is considering an acquisition of Evolent Health Inc., the healthcare group that has come under pressure from activist investors to consider a sale, according to people familiar with the matter.

  • Apple Inc. reports stronger than expected sales for its iPhone 13 series, according to KGI Securities, which reiterates an outperformance rating on the stock.

  • Boeing Co. recovered after the aerospace giant was upgraded to outperform at Bernstein on the outlook for a rebound in travel.

  • Morgan Stanley collapsed after Oppenheimer downgraded stocks, citing a lack of valuation potential.

Here are some events to watch this week:

  • House Financial Services Committee hearing on the Fed and the Treasury’s response to the pandemic, Thursday

  • China Caixin Manufacturing PMI, Non-Manufacturing PMI, Thursday

  • Univ. of Michigan sentiment, Manufacturing ISM, US construction spending, spending / personal income, Friday

For more market analysis, read our MLIV blog.

Some of the main movements in the markets:

Actions

  • The S&P 500 rose 0.7% at 2:52 p.m. New York time

  • The Nasdaq 100 rose 0.6%

  • The Dow Jones Industrial Average rose 0.8%

  • The MSCI World Index has changed little

Currencies

  • Bloomberg Dollar Spot Index rose 0.6%

  • The euro fell 0.7% to $ 1.1603

  • The British pound fell 0.7% to $ 1.3439

  • Japanese yen fell 0.4% to 111.97 per dollar

Obligations

  • The yield on 10-year treasury bills was little changed at 1.54%

  • German 10-year yield fell one basis point to -0.21%

  • The UK 10-year yield was little changed at 0.99%

Merchandise

  • West Texas Intermediate crude fell 0.5% to $ 74.90 a barrel

  • Gold futures fell 0.7% to $ 1,725.20 an ounce

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Julio V. Miller

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