US stocks gained traction amid a revival in risk sentiment with Treasury yields easing and the dollar falling as Americans vote in midterm elections.
(Bloomberg) — US stocks gained traction amid a revival in risk sentiment with Treasury yields easing and the dollar falling as Americans vote in midterm elections.
The S&P 500 rose to session highs, extending gains into a third day.
The tech-heavy Nasdaq 100 and the blue-chip Dow Industrial Average outperformed. The two-year Treasury yield shed 5 basis points, while dollar fell against most of its major counterparts.
A history of robust performance following midterm results has helped buoy optimism about the outlook for equity markets.
While polls suggest Republicans could make gains, thereby placing a check on Democratic policies, there are multiple scenarios. The best outcome for Treasuries could be a Republican control of both the House of Representatives and Senate, while the dollar could find support should Democrats keep both chambers.
Read more on elections:
Elections Latest: Polls Open With Senate Control Up for Grabs
Deeply Divided America Votes Amid Inflation Fears, Culture Wars
Here Are Key Races to Watch Hour by Hour as Midterm Voting Ends
Sentiment remains fragile with the Federal Reserve’s monetary tightening still the biggest headwind for markets.
Thursday’s consumer-price-index data may offer the next cue for traders even as money markets are raising their peak-rate wagers.
The inflation reading is coming after the core consumer price index rose more than forecast to a 40-year high in September.
Even if prices begin to moderate, the CPI is far above the Fed’s comfort zone.
“Inflation is going up. It may be coming down periodically. But it’s going up,” Richard Harris, chief executive of Port Shelter Investment Management, said on Bloomberg Television.
“The market is kind of uncertain — it’s hoping for the best but really should be preparing for the worst.”
Meanwhile, swaps markets are leaning toward a 50 basis-point Fed rate increase in December, after a fourth consecutive jumbo hike to a target range of 3.75% to 4% at last week’s meeting.
Rates are expected to peak slightly above 5% around mid-2023.
JPMorgan Chase & Co.’s Marko Kolanovic warned of the risk to stocks from ongoing Fed hawkishness, and Morgan Stanley’s Mike Wilson said companies will need to aggressively shrink expenses, including through layoffs, before he becomes more optimistic on US equities.
Nvidia Corp.
climbed as it began producing a processor for China. Take-Two Interactive Software Inc. fell after reducing its forecast for net bookings. Bitcoin tumbled as part of a crypto selloff.
Europe’s Stoxx 600 rallied, after a weak open.
Chinese equities halted a rally as traders considered a jump in virus infections and official comments defending Covid Zero.
Key events this week:
- US midterm elections, Tuesday
- EIA oil inventory report, Wednesday
- China aggregate financing, PPI, CPI, money supply, new yuan loans, Wednesday
- US wholesale inventories, MBA mortgage applications, Wednesday
- Fed officials John Williams, Tom Barkin speak at events, Wednesday
- US CPI, US initial jobless claims, Thursday
- Fed officials Lorie Logan, Esther George, Loretta Mester speak at events, Thursday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.6% as of 10:30 a.m.
New York time
- The Nasdaq 100 rose 0.7%
- The Dow Jones Industrial Average rose 0.9%
- The Stoxx Europe 600 rose 0.6%
- The MSCI World index rose 0.7%
Currencies
- The Bloomberg Dollar Spot Index fell 0.3%
- The euro rose 0.3% to $1.0046
- The British pound was little changed at $1.1519
- The Japanese yen rose 0.6% to 145.72 per dollar
Cryptocurrencies
- Bitcoin fell 6.5% to $19,335.07
- Ether fell 9% to $1,434
Bonds
- The yield on 10-year Treasuries declined six basis points to 4.16%
- Germany’s 10-year yield declined six basis points to 2.28%
- Britain’s 10-year yield declined six basis points to 3.58%
Commodities
- West Texas Intermediate crude fell 0.5% to $91.31 a barrel
- Gold futures rose 1.8% to $1,710.40 an ounce
–With assistance from Jan-Patrick Barnert, Haidi Lun and Brett Miller.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
