Treasuries Fall After Factory Data As Fed In Focus: Markets Wrap

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Treasuries Fall After Factory Data As Fed In Focus: Markets Wrap

Bonds kicked off the week on the back foot and stocks fluctuated, with traders awaiting the next few jobs readings and a multitude of Federal Reserve speakers for clues on the interest-rate path.

Treasuries fell across the curve, with the move led by longer maturities. Equities saw small moves after the S&P 500 notched its fifth-straight month of gains. Data Monday showed US factory activity unexpectedly expanded in March for the first time since September 2022 — while input costs climbed. Later this week, a report is expected to show employment gains likely continued in March while wage growth moderated. Jerome Powell — who is set to speak Wednesday — said Friday that the Fed isn’t in any rush to cut rates.

“If you did not like what Powell said on Friday, you have a chance to watch him in Prime Time, with a speech directly on the outlook of the US economy,” said Andrew Brenner at NatAlliance Securities. And with the deluge of Fed speakers this week, “expect to be jerked left and right based on what is said.”

Benchmark 10-year yields climbed advanced eight basis points to 4.28%. The S&P 500 hovered near 5,260 after notching its 22nd record this year. The tech-heavy Nasdaq 100 outperformed, with Alphabet Inc. and Nvidia Corp. leading gains in megacaps. AT&T Inc. fell after saying data from 73 million accounts were leaked on the dark web. Gold rose to a record high.

“We viewed Fed Chair Powell’s comments last Friday as remaining consistent with the ‘run hot’ scenario that is poised to keep pushing stocks higher,” said Chris Senyek at Wolfe Research. “That said, trading is likely to get much choppier following an incredibly strong run and little fear baked into stock prices.”

The rally in the S&P 500 has expanded valuations across the board, with an equal-weighted version of the benchmark gauge — where the likes of Nvidia Corp. carry the same heft as Dollar Tree Inc. — topping 17 times earnings. Although that ranks in the 92nd percentile of observations since 1985, Goldman Sachs Group Inc. found that previous periods of similar overvaluation in the benchmark have usually been preceded by further gains.

“Overvaluation alone has not historically been cause for imminent concern,” a team led by Ryan Hammond told clients in a note last week. “Periods of overvaluation often persist for nearly a year and are typically benign if the subsequent economic growth environment is healthy.”

Corporate Highlights:

  • Micron Technology Inc. climbed after Bank of America Corp. raised its price target on the memory-focused chipmaker to $144 from $120.
  • United Parcel Service Inc. said it has been awarded a significant air cargo contract by the United Stated Postal Service and will become the USPS’s primary air cargo provider.
  • A federal court approved the 3M Co.’s offer of at least $10 billion to settle PFAS claims of roughly 12,000 public water systems across the US.
  • Advent International is in advanced talks to buy Canadian payments processor Nuvei Corp., people familiar with the matter said, in a further sign that confidence is returning among private equity dealmakers.

Key events this week:

  • Eurozone S&P Global Manufacturing PMI, Tuesday
  • US factory orders, light vehicle sales, JOLTS job openings, Tuesday
  • Fed’s John Williams, Loretta Mester, Mary Daly and Michelle Bowman speak, Tuesday
  • St. Louis Fed President Alberto Musalem takes office, Tuesday. He replaces James Bullard.
  • China Caixin services PMI, Wednesday
  • Eurozone CPI, unemployment, Wednesday
  • Japan services PMI, Wednesday
  • US ADP employment, ISM Services, Wednesday
  • NATO foreign ministers meet in Brussels through Thursday, to mark the 75th anniversary of the alliance, Wednesday. The NATO-Ukraine Council also meets
  • Fed Chair Jerome Powell speaks, Wednesday
  • Fed’s Austan Goolsbee, Adriana Kugler and Michelle Bowman also speak, Wednesday
  • Eurozone S&P Global Services PMI, PPI, Thursday
  • US initial jobless claims, Challenger job cuts, Thursday
  • Fed’s Loretta Mester, Alberto Musalem, Thomas Barkin, Patrick Harker, Austan Goolsbee speak, Thursday
  • European Central Bank publishes account of March rate decision, Thursday
  • Eurozone retail sales, Friday
  • US unemployment, nonfarm payrolls, Friday
  • Fed’s Michelle Bowman, Thomas Barkin and Lorie Logan speak, Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 rose 0.1% as of 10:02 a.m. New York time
  • The Nasdaq 100 rose 0.7%
  • The Dow Jones Industrial Average fell 0.4%
  • The MSCI World index fell 0.1%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2%
  • The euro fell 0.3% to $1.0756
  • The British pound fell 0.3% to $1.2583
  • The Japanese yen fell 0.3% to 151.73 per dollar

Cryptocurrencies

  • Bitcoin fell 1.3% to $69,956.13
  • Ether fell 2.1% to $3,558.12

Bonds

  • The yield on 10-year Treasuries advanced 10 basis points to 4.30%
  • Germany’s 10-year yield was little changed at 2.30%
  • Britain’s 10-year yield was little changed at 3.93%

Commodities

  • West Texas Intermediate crude rose 0.1% to $83.28 a barrel
  • Spot gold rose 0.4% to $2,238.30 an ounce

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