| Good morning. US stocks sink ahead of jobs data. Tech earnings continue to disappoint. BOJ watchers reassess the pace of rate hikes. Here's what's moving markets. — Isabelle Lee US stocks fell sharply as bonds rallied after a fresh dose of weak economic data led traders to reconsider whether the Federal Reserve is wise to hold off cutting rates before September. Unemployment claims hit an almost one-year high and manufacturing activity shrank. Thursday's price action was another episode of extreme day-to-day volatility that has featured rapid rotations into and out of asset classes and sectors, with investors choosing Treasuries as the latest haven trade. The Nasdaq 100 saw its biggest one-day reversal since May 2022 while the S&P 500 fell. US 10-year yields broke below 4%, while swap traders are now fully pricing in three quarter-point rate cuts from the Fed this year. Jerome Powell signaled this week that officials are on course to cut rates in September unless inflation progress stalls. All eyes will now turn to the official US jobs report Friday to see if traders' views on easing are warranted. Most Bank of Japan watchers are reassessing the trajectory of interest rates and bringing forward their forecasts after Governor Kazuo Ueda's hawkish messaging Wednesday and his earlier-than-expected rate hike. A majority of economists surveyed by Bloomberg see the policy rate rising to 0.5% from 0.25% by the end of this year, with just under a quarter predicting the hike will come in October and more than 4 in 10 tipping December. Post-market earnings announcements by some of the biggest US tech firms proved mostly disappointing for investors. Intel said third-quarter revenue will be far less than forecast and announced sweeping job cuts, while Amazon projected weaker-than-anticipated profit numbers, suggesting it's spending more than expected in the race to meet demand for AI services. In recent weeks, investors have signaled growing impatience with efforts to profit from their massive AI investments. One bright spot was Apple, which marked a return to revenue growth last quarter, indicating that the new iPads helped make up for headwinds in China. The Fed is a hot topic this week for global CEOs trying to time rate cuts. It's also — unusually — a prominent feature on Corporate America's post-earnings conference calls. The words "Federal Reserve" were on track to be mentioned about 380 times on second-quarter calls with analysts, a Bloomberg analysis of transcripts of S&P 500 and Stoxx 600 companies show. That would be the highest tally ever in the database's records going back to 2001, if the current pace holds. The last time mentions of the Fed hit a peak was in late 2022, after the central bank began the sharpest rate-hiking cycle since the 1980s. A hacking group believed to be linked to the Chinese government stole passwords and documents from a Taiwanese government-affiliated research center that specializes in computing, Cisco said. The attackers used a kind of malicious software tool that's almost entirely used by China-based groups, after they gained access as early as July 2023. Based on that and other techniques, Cisco believes with "moderate confidence" that they are part of a state-sponsored espionage group called APT41, which US officials have linked to China's Ministry of State Security. Here's what caught our eye over the past 24 hours: - Russia releases US reporter in major swap for Kremlin agents
- Iran mourns a Hamas official as Israel braces for revenge
- Venezuela's Machado fears for her life, she writes in WSJ Op-Ed
- Keir Starmer gets a gift from the BOE - and a warning on his budget plans
- Exxon almost walked away from its $1 trillion oil discovery
- What next for Myanmar's junta as civil war rages?
- Workers are getting ghosted. Here's why.
The mood in US stocks has rapidly soured after Thursday's weak American economic data. Curiously, bad news is becoming bad news for equities as fears of a central bank policy mistake rise. It's too early to tell if a bigger change of regime is afoot in the stock market, but the most recent session marked a departure from the "bad news is good news" framework in which equities have traded for much of this year. Stocks have typically rallied as a widely watched index of economic surprises fell, presumably because it increased the odds of the Federal Reserve cutting interest rates. But with the Fed so far standing pat in the face of deteriorating data, there's growing concern in some quarters that that it's falling behind the curve and any rate cut may arrive too late to contain the economic, and profit, damage. The swoon in small caps is telling in that regard. Shares of smaller firms are more sensitive to economic activity weakening so they bore the brunt of the selloff Thursday. The Russell 2000 fell more than 3%, its second-worst drop this year. In the S&P 500, defensive sectors such as real estate, utilities and consumer staples held up in the green despite the broader index's drop. This also suggests that growth fears are starting to emerge. Tatiana Darie writes for Bloomberg's Markets Live blog in New York. Follow her on X at @tatianadariee. | 
No comments:
Post a Comment