US Stocks Rally Loses Steam Ahead of Powell Speech: Markets Wrap

(Bloomberg) -- US stocks and bonds wavered on Monday as traders awaited remarks from the Federal Reserve Chair later in the session. 

S&P 500 was little changed with declines in Amazon.com Inc. and Nvidia Corp. weighing on the benchmark index. Despite Monday’s weakness, a record-setting rally has put the equities gauge on track for its fourth consecutive quarter of gains — the longest such winning stretch since 2021.  

Treasury yields climbed, led by the policy-sensitive two-year note while the dollar eked out steadied. 

Investors will also be tuning in for remarks by Fed Chair Jerome Powell on Monday when he takes the stage at a National Association for Business Economics conference.  

“Powell won’t end the 25 bp versus 50 bp debate this afternoon. Or at least it is very unlikely,” according to BMO’s Ian Lyngen. Friday’s employment report is the main event this week, he noted, adding Tuesday’s JOLTS figures from August “should reinforce the idea that a cooling labor market has become the new norm.”

To Goldman Sachs Group Inc. strategists led by David Kostin, a strong print Friday may help fuel risk-on bets and embolden investors to move “out of expensive ‘quality’ stocks into less-loved lower quality firms.”

As investors gauge the outlook for Fed rate cuts, investors must ponder a cocktail of risks, including rising tensions in the Middle East. The relentless rally in stocks will also be tested by third-quarter corporate results set to kick off in mid-October.

“The bull market has survived the year’s historically weakest quarter, the third quarter, and it is likely to remain intact through at least the end of the year, as earnings remain strong, interest rates are moving lower and consumers are still spending,” said Emily Bowersock Hill at Bowersock Capital Partners.

“We expect the fourth quarter to be quite similar to the third quarter - elevated volatility, but with a strong finish,” she added. 

European stocks dropped some 1% after Jeep maker Stellantis NV cut its profit margin forecast. On Friday, Volkswagen AG had issued its second profit warning in three months. Ford Motor Co. and General Motors Co. slumped in US trading.

That was in contrast to the mood in China, where the CSI 300 Index jumped as much as 9.1%, the most since 2008, fueled by the stimulus package. The policy steps also buoyed European mining and luxury stocks. 

Corporate Highlights

Key events this week: 

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Catherine Bosley, Sagarika Jaisinghani, Kit Rees and Margaryta Kirakosian.

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