S&P 500 in Stock Rebound within a Whisker Of 4,000: Markets Wrap

(Bloomberg). — Stocks closed at their highest point in a monthly period as data showed a decrease in inflation expectations. Big banks also rebounded after losses caused by worrisome forecasts. Treasuries fell.

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Ahead of Monday’s US holiday, the S&P 500 crossed its 200-day moving average and finished within a hair of 4,000. JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., which reported results, pushed higher. The Nasdaq 100 climbed for a sixth straight day, the longest winning run since November 2021 — the month when it hit an all-time high.

“While equity and bond markets are overbought in the near term and potentially exposed to a pullback and/or a period of volatility, there are reasons for cautious optimism for the year,” said Mark Hackett, chief of investment research at Nationwide.

Read: Goldman’s Wealth CIO Says US Stocks Can Rally Despite Recession

Inflation views for the US in January fell to their lowest level in almost two years. This provided a larger-than-expected boost in consumer sentiment. Jeffrey Roach, LPL Financial, says that pricing pressures are decreasing across many sectors. This allows the Federal Reserve to slow down its rate of inflation hikes to 25 basis point at its next meeting.

“We shouldn’t be surprised if the Fed starts talking about pausing in the near future,” he added.

Fed Bank of Atlanta President Raphael Bostic told CBS News he’s leaning toward supporting a smaller rate hike at the next meeting following Thursday’s report showing a further slowing in prices.

Over the next few days, traders will be able to see how aggressive Fed inflation control has affected profit margins. JPMorgan’s boss Jamie Dimon said that while the economy remains strong “we still do not know the ultimate effect of the headwinds coming.”

Corporate earnings have yet to fully reflect the impact of last year’s rate hikes, according to Mark Haefele at UBS Global Wealth Management. He expects fourth-quarter results to provide a “reality check,” with an earnings recession in 2023 being very likely.

To Peter Oppenheimer at Goldman Sachs Group Inc., there’s an important distinction between financial markets and the economy.

“We do have a relatively positive view on economies globally: in fact, we are not looking at a recession in the US this year,” he told Bloomberg Television. “Because of that strength, interest-rate risk remains higher than the market is pricing. And that’s what feeds into a more cautious view for equity markets.”

S&P 500 earnings revisions are pointing to “a hard landing” even though the market is pricing in a soft landing, Goldman Sachs strategists led by David Kostin wrote. If there is no recession, as the team expects, S&P 500 earnings per share growth will be flat this year, they said.

According to Michael Hartnett, strategist at Bank of America Corp., stocks in the US are on the verge of a new slide and will rebound when economic conditions improve.

“It’s a back-and-forth market,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “I don’t really buy the intense gloom that some people have that it’s going to get much worse, or the other extreme that we’ve already started a new bull market. I don’t think we’re there yet either.”

Lawrence Summers, the former Treasury Secretary, said that the US economy continues to face a recession this fiscal year despite some encouraging news in recent week.

“We’ve been in the inflationary bus, which is a fancy way of saying stagflation, and that’s not a great environment for financial assets,” said Jack McIntyre, portfolio manager at Brandywine Global. “Equities don’t like the slowing economic activity and bonds don’t like the inflation part of it. So, we should get resolution this year on how do we break out of that stagflationary environment.”

Read: Yellen Advancing Extraordinary Measures to Prevent Default

These are the top market moves:

Stocks

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

  • The Nasdaq 100 rose 0.7%

  • The Dow Jones Industrial Average rose 0.3%

  • The MSCI World index rose by 0.6%

Currencies

  • The Bloomberg Dollar Spot Index declined 0.2%

  • The euro fell 0.2%, to $1.0833

  • The British Pound rose 0.2% to $1.2234

  • The Japanese yen rose 1.1%, to 127.87 dollars

Cryptocurrencies

  • Bitcoin rose 3.4%, to $19467.05

  • At $1,427, Ether was unchanged.

Bonds

  • The yield on 10-year Treasuries rose six basis points to 3.50%

  • Germany’s 10-year yield advanced one basis point to 2.17%

  • Britain’s 10-year yield advanced three basis points to 3.37%

Commodities

  • West Texas Intermediate crude oil rose 2%, to $79.95/barrel

  • Gold futures rose 1.3%, to $1.924 an ounce

Bloomberg Automation provided assistance in producing this story.

–With the help of Vildana Hjric, Emily Graffeo and Peyton Forte. Isabelle Lee. Lu Wang.

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