(Bloomberg) — Wall Street traders bracing for key inflation data sent stocks to new record highs. US Treasuries saw modest losses, while the dollar was on track for its longest gain in more than two years.
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Less than 24 hours before a report showed that consumer prices continued to moderate, the S&P 500 approached 5,800 points. Banks led the way with gains as investors braced for the start of earnings season. Apple Inc. caused the megacaps to rise. Nvidia Corp. halted a five-day rally. Tesla Inc. fluctuated prior to the launch of Robotaxi. Alphabet Inc. fell 2.3% on news that the US is considering a Google breakup in a landmark antitrust case over big tech companies.
Big tech stocks have seen volatility in both directions lately, but weakness presents an attractive buying opportunity, said Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management.
“We remain positive on the technology sector and on the prospects for artificial intelligence,” and “against this backdrop, we believe volatility should be used to build long-term exposure to AI,” she said.
Investors also awaited the minutes of the Federal Reserve’s latest meeting as they sifted through remarks from central bank speakers. Lorie Logan, president of the Fed Bank of Dallas, said she supports a slower path of rate cuts as the central bank normalizes policy away from the highest levels in more than two decades.
The S&P 500 rose 0.5%. The Nasdaq 100 added 0.5%. The Dow Jones Industrial Average rose 0.8%.
The yield on ten-year government bonds rose by six basis points to 4.07%. The Bloomberg Dollar Spot Index rose 0.4% – for an eighth straight session. West Texas Intermediate crude fell 1% to $72.82 a barrel.
US inflation is likely to moderate at the end of the third quarter, which is reassuring for a Fed that is shifting its policy focus more toward protecting the labor market.
The consumer price index rose by 0.1% in September, the smallest increase in three months. Compared to a year earlier, the CPI likely rose 2.3%, the sixth consecutive slowdown and the tamest since early 2021.
“The Fed’s decision to shift its focus from inflation to the labor market means that inflation data, including tomorrow’s CPI, is likely to become less market-moving than before,” said Matthew Weller of Forex.com and City Index. “Despite this logical observation, this month’s CPI report could still drive market volatility on the back of Friday’s stellar jobs report, a figure that signals the potential for renewed upside risks to inflation.”
A survey by 22V Research shows that 42% of investors expect the market reaction to the CPI to be ‘mixed/negligible’, 32% say ‘risk-off’ and only 25% think ‘risk-on’.
“There is general optimism about inflation,” said Dennis DeBusschere, founder of 22V. “61% of investors believe the core CPI is on a Fed-friendly glide path. The percentage expecting a recession, which rose in July, has fallen, but the percentage saying financial conditions need to tighten has risen to the highest percentage since June 2024.”
For the bull run in stocks to continue, inflation must continue to decline, the economy must have a soft landing and U.S. corporate earnings growth must remain strong and broaden, said Ed Clissold, chief U.S. strategist at Ned Davis Research.
While Saturday marks the two-year anniversary of the bull market, a crucial part of the current rally that has missed much of the past few years could – in a broader sense – exhaust the next leg higher for stock gains.
Large-cap and growth stocks have historically outperformed in the third year of a bull market, but are currently overbought versus small-cap and value stocks, Clissold noted.
The rally that has seen US stocks nearly double in value over the past five years is waning, and Bill Gross says investors should expect low but positive returns on their investments.
The billionaire investor recommends keeping stock market exposure at a moderate level, while focusing his portfolios more on defensive stocks with a small exposure to bonds.
“Not a bear market, but it’s not the same bull market anymore,” wrote Gross, the co-founder and former chief investment officer of Pimco.
Business highlights:
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Tesla Inc. posted its best-ever quarter for Chinese shipments, as the number of vehicles delivered from the Shanghai factory rose for the third month in a row.
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The crisis that Boeing Co. flood took a dramatic turn after negotiations to resolve a nearly months-long strike collapsed and S&P Global Ratings warned it could downgrade the planemaker’s credit rating to junk.
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Taiwan Semiconductor Manufacturing Co. posted a better-than-expected 39% increase in quarterly revenue, easing concerns that AI hardware spending is starting to decline.
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Rio Tinto Group has agreed to buy Arcadium Lithium Plc in an all-cash deal, valuing the US-listed miner at $6.7 billion, expanding its grip on the battery metal and marking a step back in the M&A business battle is done with the biggest deal in 17 years.
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Generac Holdings Inc. is running out of portable backup generators after Hurricane Helene and other recent storms knocked out power to millions of Americans.
Main events this week:
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US CPI, initial unemployment claims, Thursday
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John Williams and Thomas Barkin of the Fed will speak on Thursday
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JPMorgan and Wells Fargo kick off earnings season for the major Wall Street banks on Friday
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U.S. PPI, University of Michigan Consumer Confidence, Friday
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The Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman will speak Friday
Some of the major moves in the markets:
Stocks
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The S&P 500 rose 0.5% as of 1:07 p.m. New York time
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The Nasdaq 100 rose 0.5%
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The Dow Jones Industrial Average rose 0.8%
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The MSCI World Index rose 0.4%
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The Bloomberg Magnificent 7 Total Return Index was little changed
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The Russell 2000 index rose 0.5%
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.4% to $1.0938
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The British pound fell 0.3% to $1.3065
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The Japanese yen fell 0.7% to 149.24 per dollar
Cryptocurrencies
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Bitcoin fell 1.1% to $61,682.37
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Ether fell 0.6% to $2,427.93
Bonds
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The yield on ten-year government bonds rose by six basis points to 4.07%
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The German ten-year yield rose by one basis point to 2.26%
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The British ten-year yield remained little changed at 4.18%
Raw materials
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West Texas Intermediate crude fell 1% to $72.82 a barrel
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Gold fell 0.6% to $2,606.83 an ounce
This story was produced with the help of Bloomberg Automation.
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