US stocks rise and bond yields fall to 5-month lows as investors await FOMC minutes for clues on inflation

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US stocks rallied back Wednesday after the S&P 500’s seven-day record-high winning streak ended the previous day amid services sector data that suggested activity peaked in June.

The Federal Reserve is set to release its minutes from its June FOMC meeting at 2 p.m. ET. Investors will be eagerly searching for clues on the central bank’s approach to inflation and its plan to taper asset purchases.

“Given the recent rate of change in yields, we suspect the market has largely priced in a less hawkish tone buried within the minutes,” Craig Johnson, Piper Sandler chief market technician said.

The yield on the US 10-year Treasury fell six basis points to 1.30%, the lowest point since late February.

Here’s where US indexes stood at the 9:30 a.m. ET open on Wednesday:

US stocks kicked off the second half of 2021 with a record-setting rally, with some strategists anticipating that re-opening momentum and accommodative fiscal and monetary policy will continue to drive the stock market.

“Fear over runaway inflation has receded along with interest rates, setting up a potential passing of the baton from value to growth,” said Piper Sandler’s Johnson. “While we do not expect stocks to continue posting record-highs on a daily basis, we do believe the fundamental and technical backdrop supports a buy the dip strategy for investors.”

Bitcoin traded just under $35,000.

Oil prices recovered after falling on Tuesday, despite rising sharply earlier in the day after a meeting between the OPEC+ group of oil-producing countries was abruptly called off.

West Texas Intermediate crude rose 0.71% to $73.90 per barrel. Brent crude, oil’s international benchmark, gained 0.68%, to $75.04 per barrel.

Gold climbed 0.6% to $1,805 per ounce.

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US stocks close mostly higher to finish one of the strongest first halves of the year since 1998

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US stocks were mostly higher on Wednesday with weakness in tech stocks weighing on the Nasdaq. Wednesday marked the end of one of best first six months of the year for the S&P 500 since 1998, up 14% year-to-date.

Investors are now mulling how strong economic data will influence the Federal Reserve’s accommodative policy stance. Wednesday morning the ADP Employment report showed the US added 692,000 private payrolls in June, higher than the 600,000 expected. All eyes will be on to the Labor Department’s non-farm payrolls data for June set to be released on Friday.

Here’s where US indexes stood at the 4 p.m. ET close on Wednesday:

One of busiest week for initial public offerings this year is underway, with Didi soaring as much as 28% in its public debut Wednesday. Didi is the largest public debut for a Chinese company since Alibaba in 2014. Meanwhile, shares of LegalZoom popped as much as 39% in the first day of trading while cybersecurity company SentinelOne popped as much as 30%.

There have been 209 IPOs priced this year, a 226.6% change from the same date last year, per Renaissance Capital.

Retail trading activity in the US has cooled from its pandemic peak but still makes up 10% of stock trading volume on the Russell 3000, a broad benchmark of US stocks, according to a recent note by Morgan Stanley.

Bitcoin slipped 4% to $34,727 as the cryptocurrency struggles to rally higher amid a crackdown in China. The coin is finishing the first half of 2021 up 18%.

West Texas Intermediate crude rose 0.73%, to $73.52 per barrel. Brent crude, oil’s international benchmark, gained 0.49% to $75.13 per barrel.

Gold hovered around $1771 per ounce.

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S&P 500 and Nasdaq futures hover near record highs after Joe Biden strikes $1 trillion infrastructure deal, while oil prices rise

Joe Biden Rob Portman infrastructure deal
President Joe Biden (right) reached a deal with Republicans on infrastructure.

S&P 500 futures hovered near a record high on Friday after President Joe Biden struck a deal with Republicans on a $1 trillion infrastructure deal, which includes $579 billion of new spending.

Futures for the benchmark S&P 500 were up 0.05%, while Nasdaq 100 futures rose 0.04%, after both indices hit a record high on Thursday. Dow Jones futures rose 0.26%, with industrial firms more likely to benefit from infrastructure spending.

In Asia overnight, China’s CSI 300 jumped 1.63% while Japan’s Nikkei 225 climbed 0.66%. In Europe, the Stoxx 600 index slipped 0.09% in early trading.

President Biden’s deal would see over $1 trillion spent on upgrading the US’s infrastructure over the next eight years. Roads, bridges and rail networks would be particular priorities.

Biden pushed Congress to pass the bill on Thursday, saying: “We have to move and we have to move fast.”

Oil prices extended their rally on Friday, heading for a fifth weekly consecutive gain, with Brent crude up 0.36% to $75.82 a barrel and WTI crude up 0.27% to $73.50.

Richard Hunter, head of markets at Interactive Investor, said: “News of the infrastructure plan also spilled over to the oil price in anticipation of further energy demand.”

The deal helped push a broad range of stocks higher, including Caterpillar and Tesla, which both climbed more than 2.5%.

Bank shares also rose on Thursday after the Federal Reserve said lenders had passed stress tests and could resume stock buybacks and dividend payments.

Elsewhere, falling bond yields suggested investors are becoming comfortable with the central bank’s management of the economy and markets.

The yield on the key 10-year US Treasury note, which moves inversely to the price, was roughly flat on Friday at 1.488%, down sharply from a high of more than 1.75% touched at the end of March. The dollar index was down 0.1% to 91.72.

One possible obstacle for markets is the release of the May core personal consumption expenditures price index, the Fed’s preferred measure of inflation, due at 8.30 a.m. ET. Analysts expect a 3.4% increase from 3.1% in April.

“While Fed officials have assured us that all of this is likely to be transitory, a high number could well give the markets pause,” Michael Hewson, chief market analyst at trading platform CMC Markets, said.

Bitcoin slipped 1.8% to $34.226, according to Bloomberg data. The cryptocurrency fell below $30,000 on Tuesday, but investors have since shown willingness to buy the dip.

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US futures rise ahead of jobless claims and Fed speeches, while oil extends rally as outlook brightens

A trader works at the New York Stock Exchange (NYSE) in New York, U.S., February 4, 2020. REUTERS/Bryan R Smith
A trader works at the New York Stock Exchange

US stock index futures climbed on Thursday as investors awaited the release of weekly jobless claims data and prepared to digest a series of speeches from Federal Reserve officials.

Meanwhile, oil prices extended their rally as the outlook for the global economy brightened, with vaccine rollouts spurring expectations of strong demand for energy in the coming months. Oil is on course for a third straight monthly gain in June.

In Europe, stocks rose ahead of the Bank of England’s interest rate decision. It is expected to leave monetary policy on hold but investors will scrutinize the decision for signs of concerns about inflation, which jumped above the Bank’s 2% target in May.

Futures for the US benchmark S&P 500 rose 0.41%, after the index slipped slightly on Wednesday. Dow Jones futures climbed 0.4% while Nasdaq 100 futures gained 0.54%.

Europe’s Stoxx 600 rose 0.59% in early European trading, while London’s FTSE 100 was 0.2% higher. China’s CSI 300 climbed 0.17% overnight while Japan’s Nikkei 225 was flat.

Investors awaited US jobless claims data on Thursday, after a quiet week on the economics front. Economists expect weekly initial jobless claims to drop below 400,000, after a surprise rise to 412,000 the previous week.

John Williams, the President of the New York Fed, and Raphael Bostic, Atlanta Fed President, are among the key central bank officials making public comments on Thursday. Investors will parse their words for any hints about the future direction of US monetary policy.

On Wednesday, Dallas Fed President Robert Kaplan said he thought the central bank would have to start cutting back its support sooner than people expected, moving markets somewhat.

“As we make substantial further progress… I think we’d be far better off, from a risk-management point of view, beginning to adjust these purchases of Treasuries,” he told Bloomberg.

The yield on the key 10-year US Treasury note climbed 1.3 basis points to 1.5% on Thursday. The dollar index slipped 0.08% to 91.73.

Jeffrey Halley, senior market analyst at currency group Oanda, said the light economic calendar means “we will remain at the mercy of Fed-speak and a schizophrenic intra-day market.”

However, investors will get a clearer sense of what global central banks are thinking about inflation and their support packages when the Bank of England makes its interest rate decision at 7.00 a.m. ET.

Elsewhere in markets, oil prices extended their rally. Brent crude rose 0.6% to $75.64 a barrel while WTI crude climbed 0.53% to $73.47.

Prices have risen by almost a quarter in the last three months, as the outlook for the global economy has brightened, and investors feel secure that the OPEC+ group of oil producing countries will closely manage supply.

Bitcoin’s recovery – which saw the price rise above $34,000 on Wednesday and dropping below $30,000 a day earlier – ran into trouble. The cryptocurrency was down 0.4% on Thursday at $32,913.

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Oil could jump above $100 for the first time since 2014 next year as demand soars, Bank of America says

Oil pump sunset background
  • Oil prices could briefly spike to $100 per barrel in 2022 as demand surges, Bank of America says.
  • On the demand front, pent-up desires to move out and about after an 18 month lockdown will push prices higher.
  • Brent crude hasn’t hit $100 since 2014. On Tuesday it jumped above $75 a barrel for the first time in two years.
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Oil prices could briefly spike to $100 per barrel in 2022 as demand surges, Bank of America says.

The firm’s Francisco Blanch said that three demand and three supply factors will push Brent to a “Benjamin” level. Brent crude hasn’t hit $100 since 2014.

On the demand front, people’s pent-up desire to move out and about after an 18 month lockdown will push prices higher, as well as a a continued use of private cars as commuters are slow to return to mass transit. He also said that more remote work could result in more miles driven, “as work-from-home turns into work-from-car.”

On the supply side, Blanch expects government policy pressure in the US and around the world to curb capital expenditures over the coming quarters to meeting goals outlined in the Paris Agreement and to limit CO2 emissions. Also, investors have become more vocal about ESG and that could curb supply.

“In short, demand is poised to bounce back and supply may not fully keep up, placing OPEC in control of the oil market in 2022,” Blanch said.

As a result, BofA increased its Brent crude oil price forecast for 2021 from $63 per barrel to $68 per barrel and upped its 2022 crude oil projections to $75 per barrel from $60 per barrel.

” Still, non-OPEC oil supply elasticity has not totally vanished. US shale will likely respond to these higher prices, suggesting that Brent will roll back down to average $65/bbl by 2023,” he added.

On Tuesday Brent crude jumped above $75 a barrel for the first time in two years. It now sits at $74.90.

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Nasdaq closes at a record as Fed’s Powell reiterates that rising inflation is transitory

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US stocks ticked higher after the Federal Reserve chair reiterated his outlook that inflationary pressures will be transitory. In a testimony to the House Select Subcommittee Tuesday, Jerome Powell suggested that he had no fears that prices will come down, but it’s hard to say when bottlenecks are going to disappear. He also said that strong job creation should arrive in the fall.

Almost every sector in the S&P 500 ended in the green, while Microsoft hit a $2 trillion market cap for the first time ever. It’s the second-largest public company by market capitalization behind Apple ($2.3 trillion). Gains in tech stocks propelled the Nasdaq to a record closing high.

Here’s where US indexes stood at the 4 p.m. ET close on Tuesday:

The cryptocurrency space continued to tumble. Bitcoin hit its lowest point since January before picking back up $32,000. t’s now facing a make-or-break moment at the key technical support level of $30,000. Ether dropped 14% on Tuesday to a 24-hour low of $1,732.85, Ripple’s XRP dropped nearly 25%, and dogecoin has fallen 47% in the last seven days.

Meanwhile, investors’ view towards cryptocurrencies remains extremely polarized, according to a survey conducted by JPMorgan. The survey found that 51% of the investors believe cryptocurrencies are here to stay, while 49% of survey respondents believe cryptocurrencies are either “rat poison” (33%) or a temporary fad (16%).

A return to 1970s-style inflation is unlikely given deeper deflationary impulses, saidBridgewater co-CIO Bob Prince in a recent interview. The head of the world’s biggest hedge fund expects future months will bring some “moderate” inflation, rather than the double-digit price hikes that pummeled America in the 1970s.

West Texas Intermediate crude fell 0.79% to $73.08 per barrel. Brent crude, oil’s international benchmark, jumped above $75 a barrel for the first time in two years this morning. It now sits at $74.90.

Gold slipped 0.17% to $1,779.80 per ounce.

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S&P 500, Nasdaq close at records as investors shrug off inflation concerns

Trader on the floor of the New York Stock Exchange

The S&P 500 recorded a record high for the second trading day in a row while a rally in tech stocks helped lift the Nasdaq to a record high. Investors are awaiting a key Fed decision later this week. Technology was the best performing sector in the S&P 500, with Apple gaining 2% and Facebook climbing over 1%. The yield on the US 10-yr Treasury rose to 1.5% after hitting a three month low last week.

Investors are eagerly awaiting for signals from the US Federal Reserve later this week about a timetable for scaling back ultra-accommodative policies. The decision is due Wednesday, with most economists anticipating the central bank will leave its policy mostly unchanged.

Here’s where US indexes stood at the 4 p.m. ET close on Monday:

Strategists can’t seem to agree on whether inflation will be transitory or not, despite the Fed insisting it will be short lived.

In an interview with CNBC on Monday, billionaire investor Paul Tudor Jones said he’s preparing to go “all in” on his inflation trade if the Fed remains unconcerned about rising prices. But others note that last week’s CPI data was elevated due to year-over-year comparisons.

“The largest increases were limited to used vehicles, energy and airfare,” said Nuveen’s Saira Malik. “Given the lack of evidence of rampant, widespread inflation, we remain confident in the Fed’s ability to stay on-message, even if discussions of tapering come a few quarters earlier than originally expected.”

Elsewhere in markets, Lumber prices fell as much as 6% on Monday to briefly trade below $1,000 per thousand board feet for the first time since late March.

Bitcoin rose above $40,000 after Elon Musk suggested Tesla would accept payment in cryptocurrency once mining can be done using cleaner energy.

West Texas Intermediate crude gained as much as 1.2%, to $71.78 per barrel. Brent crude, oil’s international benchmark, rose 1.3%, to $73.64 per barrel, at intraday highs.

Gold fell as much as 1.8%, to $1845.70 per ounce.

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Stock investors are poised to miss out on soaring oil prices with energy only making up 2% of portfolios, BofA says

FILE PHOTO: A section of the BP Eastern Trough Area Project (ETAP) oil platform is seen in the North Sea, around 100 miles east of Aberdeen in Scotland, Britain, February 24, 2014.    REUTERS/Andy Buchanan/Pool/File Photo
An oil platform stands in the North Sea in Scotland.

  • The energy sector has a low weighting in most long-only investment portfolios, according to Bank of America.
  • Low exposure to energy will mean many investors will lose out on potential gains to be made as oil prices rise.
  • The energy sector is up about 45% this year compared with the S&P 500’s roughly 13% gain.
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Oil prices are primed to push higher in the near term but many investors may miss out on building wealth from those moves because most portfolios have very low exposure to the energy sector, according to Bank of America.

Supply constraints and growing demand for oil as coronavirus vaccinations allow more people to return to work and travel are factors that will contribute to drawing up the commodity’s value and build on price gains of at least 40% this year for both Brent crude and West Texas Intermediate crude.

The impact of the upside risk, however, may bypass numerous investors as the energy sector has 2% of an average long-only portfolio manager’s weight. This “paltry” level is about half as much as the 4.2% exposure to tech-behemoth Facebook, said Savita Subramanian, head of US equity strategy and quantitative strategy at BofA Securities, in a note published Thursday.

“Not owning Energy wasn’t painful when the sector was <2% of the S&P 500,” she wrote. “But the astronomic 92% price return since October has bumped Energy’s weight to 3%; another big move in oil may be felt more acutely.”

The energy sector collapsed in 2020, losing nearly 40% as oil prices briefly dropped into negative territory in a market rocked by a plunge in demand due to the coronavirus pandemic. The sector, along with oil prices, managed to dig out of the red in part as OPEC and its allies cut production to address the buildup in oil stockpiles.

The energy sector this year has gained 45% compared with the S&P 500 index’s nearly 13% rise to record highs. Brent crude and WTI prices over the past 12 months have run up by nearly 90% and 95%, respectively, leaving Brent to fetch more than $72 a barrel, and WTI to trade above $70 a barrel.

“If Energy doubled again, and all other sectors saw average returns, investors with no Energy exposure would sacrifice a full 3 percentage points of alpha,” or returns above a compatible benchmark index, wrote Subramanian. Losing out on 3% would more than obliterate relative gains of 0.59% this year, she said.

Meanwhile, ESG funds centered on environmental, social, and governance issues such as clean energy stand to underperform even more given their 70% underweight in the sector, said the strategist.

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US stocks slip as investors await key inflation data

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A trader works on the floor of the New York Stock Exchange January 6, 2014.

  • US stocks drifted from records as investors braced for key inflation data out tomorrow.
  • Wall Street is worried overheating inflation may force the Federal Reserve to change its ultra-easy monetary policy.
  • Bitcoin recovered from its slump as El Salvador said it is adopting the crypto as legal tender.
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US stocks slipped into the close, stumbling away from record highs as investors await key inflation data out tomorrow. The yield on 10-year US Treasury declined five basis points to 1.49%

“Like waiting for the first Star Wars movie sequel, investors are holding their breath for what is expected to be a blockbuster May CPI report,” said Sam Stovall, CFRA chief investment strategist. “Yet in the face of such ‘inflation certainty,’ the 10-year yield has fallen below 1.5%, possibly due to the DC gridlock that likely stamped ‘DOA’ atop the $1.7 trillion Biden infrastructure proposal and questions the need for further fiscal assistance.”

Here’s where US indexes stood at the 4 p.m. ET close on Wednesday:

Bitcoin rose back above $36,000, boosted by El Salvador’s historic move in becoming the first country to establish bitcoin as legal tender. This gives the cryptocurrency the same status as the US dollar in the country.

Shares of Lordstown Motors slumped, deepening losses from the previous session after the electric-vehicle maker said it doesn’t have enough cash to start producing its Endurance truck and warned that it may have to shut down altogether.

In more encouraging SPAC news, retail investors will be able to buy into the IPOs of four blank-check companies run by Chamath Palihapitiya through SoFi’s trading platform, SEC filings revealed.

West Texas Intermediate crude fell 0.4% to $70 per barrel. Brent crude, oil’s international benchmark, dropped 0.29%, to $72.01 per barrel.

Gold dipped 0.1% to $1,891 per ounce.

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US futures inch lower for fourth day as investors digest Fed minutes, while bitcoin rebounds after crypto crash

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US stock index futures inched lower on Thursday morning.

US stock index futures inched lower for a fourth day on Thursday after equities fell in the previous session amid concerns the Federal Reserve might cut back on support for the economy sooner than expected and as cryptocurrency markets crashed.

Bitcoin rebounded somewhat after falling as much as 30% on Wednesday in the wake of Tesla’s U-turn on payments and a decision by China to crack down on the token’s use.

S&P 500 futures slipped 0.15% Thursday after the index fell for the third consecutive day on Wednesday. Dow Jones futures were down 0.22% but Nasdaq 100 futures were up 0.05%.

European stocks rebounded from sharp falls on Wednesday, when fresh concerns about the economic recovery and the actions of central banks came to the fore. The continent-wide Stoxx 600 was 0.5% higher.

In Asia, China’s CSI 300 closed 0.27% higher overnight, while Japan’s Nikkei 225 eked out a 0.19% increase.

Markets had a rocky day on Wednesday, with US stocks falling sharply before rebounding to close only slightly lower.

The release of the minutes from the Fed’s last interest rate meeting unnerved investors. A single line showed the central bank had discussed the possibility of eventually starting to talk about cutting back on bond purchases as growth and inflation pick up.

“A number of participants suggested that if the economy continued to make rapid progress toward the committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases,” the minutes said.

US bond yields, which move inversely to prices, jumped as investors digested the minutes. The yield on the key 10-year US Treasury note rose as high as 1.692%, after starting the week at around 1.63%. Yet it slipped back to 1.661% on Thursday.

Analysts were not entirely sure how to interpret the Fed minutes, causing gyrations in stocks. Jeffrey Halley, senior market analyst at trading platform Oanda, said the minutes “restored a sense of order” by confirming that the Fed remained committed to its ultra-loose monetary policy for the foreseeable future.

Yet Jim Reid of Deutsche Bank said they showed Fed policymakers “have indeed talked about talking about tapering.”

Many investors are highly concerned that rising inflation will erode the value of their portfolios. They are equally as concerned that it will force the Fed and other central banks to reduce their support for the economy, weighing on stocks and growth.

In a sign that investors are becoming wary of high asset prices, bitcoin plunged as much as 30% to $30,000 on Wednesday following a breakneck rally in the first months of 2021 that took the price near $65,000 in April.

The digital asset rebounded later in the day and continued to claw its way higher on Thursday, rising 4.2% to $39,949.

Bitcoin’s rapid multi-day slide was triggered by Elon Musk saying Tesla would no longer accept it as payment for cars due to its “insane” energy use. But the catalyst for Wednesday’s crash was a move by Chinese regulators to step up their pressure on the token’s use.

Analysts said the crypto crash made itself felt across the wider market. “Typically, moves in the crypto arena are rather isolated,” Michael Brown, senior market analyst at Caxton FX, said. “Yesterday, though, was different, with the sell-off in the crypto arena sparking some notable risk aversion elsewhere.”

Brown added: “This ripple effect seems to be a strong illustration of how large crypto markets have become; the correlation between these assets is, at least intraday, fairly clear to see.”

Oil prices also tumbled on Wednesday as investor confidence fell. But Brent crude had steadied on Thursday and rose 0.11% to $66.72 a barrel, while WTI crude climbed 0.32% to $63.53 a barrel.

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