Treasury Rally Stalls at Start of Data-Packed Week: Markets Wrap

Treasury rally stalls at start of Data-Packed week. The world’s biggest bond market got hit while stocks saw mild gains as traders braced for a barrage of economic data and remarks from Federal Reserve speakers that will help shape the outlook for interest rates.

Treasuries dropped across the curve, erasing most of the month-end gains accumulated at the end of Friday’s holiday-shortened session. A heavy slate of new corporate bond offerings was also a factor. With no US auctions slated until Dec. 10, focus is on the first major indicators for November — including Monday’s manufacturing and the jobs report on Friday. That’s alongside comments by Fed officials including Chair Jerome Powell Wednesday as a Dec. 18 rate cut is only about half priced into swaps.

“This week will be dominated by Fedspeak and the employment numbers,” said Andrew Brenner at NatAlliance Securities. “There is no way there won’t be a big move off the payroll numbers. We do know that the Fed has prioritized employment over inflation in their dual mandate with all their speeches, Powell in particular, focusing on employment deterioration versus a mild uptick in inflation.”

US hiring probably jumped in November after hurricanes and a major strike undercut job growth a month earlier, consistent with a labor market that’s healthy yet gradually cooling. Nonfarm payrolls probably advanced by 200,000 in November, according to a Bloomberg survey of economists. The data due Friday are also expected to show the unemployment rate held at 4.1%.

Treasury 10-year yields advanced six basis points to 4.23%. The dollar snapped a three-day losing streak amid focus on French budget talks and a fresh currency warning to BRICS nations by President-elect Donald Trump.

The S&P 500 added 0.2%. The Nasdaq 100 rose 0.3%. The Dow Jones Industrial Average gained 0.1%. Intel Corp. climbed as Chief Executive Officer Pat Gelsinger is leaving the job after the chipmaker’s turnaround sputtered. Tesla Inc rallied after bullish analyst comments.

Small- and mid-cap stocks have the potential to deliver double-digit gains next year under a best-case scenario, although “a lot can go wrong,” according to JPMorgan Chase & Co. strategists including Eduardo Lecubarri.

The group is heavily under-owned after three years of record cumulative outflows, while valuations show an above-average discount to large caps, they wrote. The relative fundamental picture for small- and mid-caps no longer faces headwinds such as rising rates and wages. The strategists also noted that Donald Trump’s election victory also serves as a catalyst as investors are likely to prefer domestic exposure.

Corporate Highlights:

• Super Micro Computer Inc. said an external review of its business by a special committee of its board and external counsel found no evidence of wrongdoing and that the company will appoint new top financial leadership.
• MicroStrategy Inc. bought another $1.5 billion in Bitcoin, the fourth consecutive weekly purchase announced by the crypto hedge fund proxy.
• Cloudflare Inc.was upgraded by Morgan Stanley, which said the software maker can “sustain, if not accelerate, topline growth over the next few years.”
• Core Scientific Inc.intends to offer $500 million in convertible notes via a private offering.
• Gap Inc.was upgraded at JPMorgan Chase & Co., which said the foundation has been set to support a “consistent playbook of improved merchandising and marketing.”
• Stellantis NV Chief Executive Officer Carlos Tavares’s surprise departure leaves the maker of Jeep SUVs and Peugeot cars without clear leadership at a time of significant upheaval in the industry.
• Toast Inc.was downgraded at Goldman Sachs Group Inc., which cited an elevated valuation following a recent rally.
• Upstart Holdings Inc.was downgraded at JPMorgan Chase & Co., a move that’s based on valuation as shares appear to be “priced for perfection.”

Key events this week:

• Fed’s Adriana Kugler and Austan Goolsbee speak, Tuesday
• Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday
• US factory orders, US durable goods, Wednesday
• Fed’s Jerome Powell and Alberto Musalem speak, Wednesday
• Fed’s Beige Book, Wednesday
• Eurozone retail sales, Thursday
• US initial jobless claims, Thursday
• Eurozone GDP, Friday
• US jobs report, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 9:30 a.m. New York time
• The Nasdaq 100 rose 0.3%
• The Dow Jones Industrial Average rose 0.1%
• The Stoxx Europe 600 rose 0.6%
• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.6%
• The euro fell 0.8% to $1.0495
• The British pound fell 0.5% to $1.2671
• The Japanese yen fell 0.2% to 150.01 per dollar

Cryptocurrencies

• Bitcoin fell 1.8% to $96,016.43
• Ether fell 2% to $3,635.42

Bonds

• The yield on 10-year Treasuries advanced six basis points to 4.23%
• Germany’s 10-year yield declined four basis points to 2.05%
• Britain’s 10-year yield was little changed at 4.24%

Commodities

• West Texas Intermediate crude rose 1.3% to $68.90 a barrel
• Spot gold rose 0.1% to $2,646.67 an ounce

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