Stocks rebounded, with traders weighing the outlook for Federal Reserve policy and prospects that China could move faster in loosening Covid curbs that prompted protests in a number of cities.
(Bloomberg) — Stocks rebounded, with traders weighing the outlook for Federal Reserve policy and prospects that China could move faster in loosening Covid curbs that prompted protests in a number of cities.
The S&P 500 halted a two-day drop, while the dollar fell with bonds.
Amazon.com Inc. is looking to sell investment-grade bonds for general corporate purposes. US-listed Chinese shares climbed as officials vowed to speed up Covid shots for the elderly and avoid excessive restrictions, fueling a new round of bets that Beijing is bending to pressure for a reopening.
“If sentiment towards Covid policy expectations and the latest wide-spread protests improve, then stocks will be able to stabilize as that was a major bearish influence on the market yesterday,” wrote Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter.
Another tailwind for stocks is the possibility that the Fed will move to a slower hiking pace, with Chair Jerome Powell seen cementing those bets when he speaks on Wednesday.
Data showed US consumer confidence fell in November to a four-month low amid the double blow of persistent inflation and rising interest rates.
Ned Davis Research says global stock-market breadth is improving, an optimistic sign for investors hoping to see a sustained equity rally in the coming months.
To gauge how much the bullish trend could continue, the strategists pointed to the MSCI ACWI Index, which includes large- and mid-cap stocks in developed and emerging markets.
Among ACWI markets, more than 90% are above their 50-day moving average, while more than 60% are topping their longer-term 200-day moving average, the strategists said.
If the latter’s percentage rises to 85%, they project it would reach a level that would turn bullish.
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Several widely followed DeMark indicators, which try to anticipate momentum and long-term trend reversals, suggest the Cboe Volatility Index may be poised for a reversal.
History shows that the appearance of a “countdown 13” pattern has led to turns in the past, with a cluster of such signals occurring at the more-recent lows.
The so-called fear gauge last week fell to its lowest level since August as the S&P 500 Index continued its upward march — with the US equity measure up 11% from its October low through Monday.
“There is still risk here in the end,” Alicia Levine at BNY Mellon Wealth Management told Bloomberg Television.
“This is the transition year. Next year is, ‘OK, now your rates are higher, what does it mean for the real economy?’ And that I think we really have not priced in.”
Levine notes that even in a shallow recession, S&P 500 companies can still see earnings declines of 20%.
Meantime, former greenback bulls including JPMorgan Asset Management and Morgan Stanley say the era of dollar strength is ending as cooling prices spur markets to trim bets on further Federal Reserve tightening.
That may spell buying opportunities for the currencies of Europe, Japan and emerging markets.
Elsewhere, oil rose as investors looked ahead to an OPEC+ meeting that may see a supply cut to counter market weakness.
Key events this week:
- EIA crude oil inventory report, Wednesday
- China PMI, Wednesday
- Fed Chair Jerome Powell speech, Wednesday
- Fed releases its Beige Book, Wednesday
- US wholesale inventories, GDP, Wednesday
- S&P Global PMIs, Thursday
- US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
- BOJ’s Haruhiko Kuroda speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.3% as of 10:30 a.m.
New York time
- The Nasdaq 100 rose 0.2%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.3%
- The MSCI World index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.3% to $1.0370
- The British pound rose 0.4% to $1.2010
- The Japanese yen rose 0.5% to 138.25 per dollar
Cryptocurrencies
- Bitcoin rose 1.5% to $16,431.78
- Ether rose 3.6% to $1,214.13
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.71%
- Germany’s 10-year yield declined seven basis points to 1.92%
- Britain’s 10-year yield was little changed at 3.12%
Commodities
- West Texas Intermediate crude rose 2.7% to $79.35 a barrel
- Gold futures rose 0.9% to $1,771.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sujata Rao, John Viljoen and Peyton Forte.
More stories like this are available on bloomberg.com
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