Stocks remain near record as traders await catalyst: market close

(Bloomberg) — Stocks and U.S. stock futures were steady in subdued trading as investors waited for fresh momentum after the S&P 500 broke new records in a week and European stocks fell just below that mark.

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S&P 500 futures edged up 0.2% and Nasdaq 100 contracts rose 0.3% as U.S. cash markets were closed for Presidents Day. The results of the leading company Nvidia Corp. on Wednesday could provide fresh impetus to stocks as investors try to gauge the strength of the global economy.

The Stoxx Europe 600 was little changed after last week's 1.4% rise, which brought the index to within four points of its January 2021 high. Materials stocks led declines after iron ore slumped, while the technology sector also underperformed. Defensive sectors, including telecommunications and healthcare, posted gains.

Among individual suppliers in Europe, AstraZeneca PLc rose more than 3% after trial data showed its Tagrisso drug slowed disease progression in lung cancer patients. German defense group Rheinmetall AG rose as much as 4% after announcing the opening of a new factory in Ukraine. Banco Santander SA rose after launching a share buyback.

U.S. and global stocks have yet to respond to the selloff in Treasury bonds this month after a series of better-than-expected economic data and hawkish comments from policymakers led traders to scale back aggressive bets on interest rate cuts. Investors are also grappling with mixed returns, while the Middle East conflict and shipping chaos in the Red Sea pose major risks to the earnings outlook.

“Our base case remains that stocks will end the year above current levels, but we don't expect a straight path,” said Mohit Kumar, chief Europe economist at Jefferies International Ltd. “We are looking for something of a short-term pullback that would provide better levels for rebalancing long positions.”

The story goes on

Swaps now price in about 90 basis points of Federal Reserve rate cuts in 2024, up from more than 150 basis points in early February. In Europe, stakes were reduced from 150 to around 100 basis points.

For JPMorgan Asset Management, US stocks are perfectly valued given the “healthier” market dynamics since the beginning of the year.

“Markets have become accustomed to the idea that rate cuts would come later and likely be less significant than initially priced in,” Vincent Juvyns, global market strategist, said on Bloomberg Television. The upward trend was also “primarily due to the decent earnings growth we saw in the fourth quarter,” he added.

This week, traders will be keeping an eye on European inflation data as well as earnings from Nvidia and mining giants BHP Group Ltd and Rio Tinto Plc. Meanwhile, the conflict in the Middle East is likely to drag on as negotiations to secure a ceasefire between Israel and Hamas and release hostages have not progressed as hoped, Qatar's foreign minister said.

Bond markets were subdued as there was no cash trading in government bonds due to the US holiday. They fell on Friday, with two-year yields rising seven basis points to 4.65% after the producer price index rose on a sizeable rise in services costs. The dollar weakened against most of its Group of 10 peers.

China is reopening

Elsewhere, an indicator for Asia-Pacific stocks trended higher and was expected to rise for a third session. China's benchmark CSI 300 index recovered from earlier losses on the first day of trading after the New Year break. Stocks had struggled in the early hours despite buoyant travel and tourism data that suggested consumption was picking up even as the broader economy struggles with deflation and a housing crisis.

Traders now expect further policy support across China's monetary and fiscal policy space, in addition to an already implemented reserve requirement ratio cut. Chinese Premier Li Qiang on Sunday called for “pragmatic and forceful” measures to boost the country's confidence in the economy.

In commodities, oil prices fell from their highest in three weeks as ongoing concerns over the demand outlook offset ongoing tensions in the Middle East. Gold posted a two-day gain. Concerns about the Chinese economy also caused iron ore prices to slump after five days of gains.

Some of this week's key events:

• Reserve Bank of Australia February Tuesday Meeting Minutes

• Key interest rates for Chinese loans, Tuesday

• BHP Group Ltd results, Tuesday

• The European Central Bank will publish an indicator for negotiated wages for the euro area on Tuesday

• Rio Tinto Plc results Wednesday

• Eurozone consumer confidence, Wednesday

• Nvidia Corp. earnings Wednesday

• January Federal Reserve meeting minutes, Wednesday

• Atlanta Fed President Raphael Bostic speaks on Wednesday

• CPI, Eurozone PMI, Thursday

• The European Central Bank will publish the report of its January 25 meeting on Thursday

• Fed Governor Lisa Cook and Minneapolis Fed President Neel Kashkar speak Thursday

• Property prices in China, Friday

• Isabel Schnabel, board member of the European Central Bank, speaks on Friday

Some of the key moves in the markets:

Shares

• S&P 500 futures rose 0.2% at 9:58 a.m. New York time

• The futures on the Dow Jones Industrial Average hardly changed

• The Stoxx Europe 600 rose 0.1%

• The MSCI World Index has hardly changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1% to $1.0766

• The British pound was little changed at $1.2595

• The Japanese yen rose 0.1% to 150.04 per dollar

Cryptocurrencies

• Bitcoin rose 0.5% to $52,118.09

• Ether rose 1.9% to $2,900.64

Tie up

• The yield on 10-year government bonds remained little changed at 4.28%

• The 10-year German government bond yield rose one basis point to 2.41%

• The yield on 10-year British government bonds has barely changed at 4.12%

raw materials

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• West Texas Intermediate crude rose 0.4% to $79.51 a barrel

• Spot gold rose 0.2% to $2,017.59 an ounce

This story was produced with support from Bloomberg Automation.

– With support from Charlotte Yang and Tassia Sipahutar.

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