Megacap Stocks Trade at Record After Economic Data: Markets Wrap

Megacap technology companies rallied after the latest round of economic data bolstered speculation the Federal Reserve will continue providing stimulus to propel growth.

The NYSE FANG+ Index of pandemic darlings such as Apple Inc. and Amazon.com Inc. hit a fresh record on Wednesday as investors turned to defensive shares amid signs economic growth may have peaked. Technology, utilities and real-estate firms were among the biggest gainers in the S&P 500, while financial and industrial stocks fell.

U.S. companies added fewer jobs than expected in August, ADP Research Institute data showed, suggesting a slowdown in the labor market recovery. While manufacturing expanded at a stronger-than-estimated pace, supply-chain bottlenecks were accompanied by labor constraints. Those figures came before key payrolls data on Friday, with economists expecting a deceleration from the rapid gain in the prior month and a drop in the unemployment rate.

For several analysts, August’s employment report isn’t likely to clarify the labor-market picture and the timing for Fed stimulus tapering as the delta coronavirus variant weighs on consumer sentiment. While June and July were strong months for hiring as restrictions on service industries were lifted, total U.S. employment is still about 6 million jobs below pre-pandemic levels.

“The private payrolls numbers have been all over the map during the pandemic, and often not the strongest indicator of how the rest of the jobs report will play out,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial. “With so much pressure on improvement on the labor-market front coming from the Fed, this could send a signal that jobs growth is stagnating. That’s likely a good thing for the markets though, as it means easy-money policy continues.”

Citigroup Inc.’s Tobias Levkovich is sticking to one of Wall Street’s most-bearish equity calls. The bank’s chief U.S. equity strategist is holding on to his prediction that the index will end the year at 4,000 before reaching 4,350 by June 2022. Both levels sit below its last close of 4,522.68. Underpinning his view are stretched valuations and a planned tax rise that will hurt corporate profits.

The Treasury 10-year note’s yield has scope to rise to 1.90% in the coming months, a level it hasn’t exceeded since January 2020, according to JPMorgan Chase & Co. technical strategist Jason Hunter. He cited the “aggressive rally that created extreme overbought conditions” as one of the reasons for his prediction. The benchmark bond rate is currently around 1.3%.

Some corporate highlights:

• Apple climbed to another record after an analyst upgraded the shares, citing strong demand trends for the iPhone.
• Chinese stocks listed in the U.S. are gaining for a third consecutive day as investor sentiment begins to recover after a selloff fueled by Beijing’s sweeping regulatory crackdown.
• Cathie Wood was apparently unfazed by Zoom Video Communications Inc.’s post-earnings decline. Her Ark Investment Management bought almost 200,000 shares of the video-conferencing company in at least two exchange-traded funds.

Here are some key events to watch this week:

• U.S. factory orders, durable goods, trade balance, initial jobless claims Thursday
• U.S. jobs report Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.1% as of 11:48 a.m. New York time
• The Nasdaq 100 rose 0.6%
• The Dow Jones Industrial Average fell 0.1%
• The Stoxx Europe 600 rose 0.5%
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.4% to $1.1851
• The British pound rose 0.2% to $1.3789
• The Japanese yen was unchanged at 110.02 per dollar

Bonds

• The yield on 10-year Treasuries was little changed at 1.30%
• Germany’s 10-year yield advanced one basis point to -0.37%
• Britain’s 10-year yield declined two basis points to 0.69%

Commodities

• West Texas Intermediate crude fell 1% to $67.79 a barrel
• Gold futures were little changed

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