Stocks took a hit as traders adjusted their expectations for Federal Reserve rate cuts, causing Treasury 10-year yields to climb above 4%. Meanwhile, the oil market saw a rally amid speculation about potential retaliation from Israel against Tehran following a recent missile attack.
With a relatively quiet economic calendar on Monday, Wall Street looked ahead to a series of Fed speakers and key inflation data slated for later in the week. The strong job growth numbers for September led to a reassessment of inflation expectations, fueling speculation that the Fed may opt for a smaller rate cut in the coming months.
Market sentiment shifted, with money markets no longer pricing in another half-point cut this year. The likelihood of a quarter-point reduction in November, previously seen as a certainty, now stands at an 86% probability.
Chris Larkin, a strategist at E*Trade from Morgan Stanley, noted, “Friday’s strong jobs report not only appeared to kill any chance of a 50-basis-point rate cut in November, it kickstarted chatter about the Fed leaving rates unchanged if economic data continues to come in hotter than expected. However, as last week demonstrated, geopolitical tensions in the Middle East could introduce volatility.”
The S&P 500 dipped to around 5,730, while Treasury 10-year yields saw a six basis point increase to 4.02%. West Texas Intermediate crude oil rose by 1.5% to $75.46 per barrel.
In corporate news, Chevron Corp. reached an agreement to sell stakes in oil sands and shale assets in Western Canada to Canadian Natural Resources Ltd. for $6.5 billion. Activist investor Starboard Value disclosed a $1 billion stake in Pfizer Inc. and is reportedly pushing for a turnaround at the pharmaceutical company. Amazon.com Inc. saw a decline in its stock price after Wells Fargo & Co. downgraded the e-commerce and cloud computing giant, citing various challenges. Casino stocks experienced gains following Wynn Resorts Ltd.’s receipt of a commercial gaming operator’s license in the United Arab Emirates. Air Products and Chemicals Inc. also climbed after reports surfaced that activist investor Mantle Ridge had acquired a stake of over $1 billion in the company. Additionally, Apollo Global Management Inc. announced plans to acquire Barnes Group Inc. in an all-cash transaction valued at approximately $3.6 billion.
Looking ahead, key events this week include a lineup of Fed speakers, the release of Fed minutes, US initial jobless claims and CPI data, as well as earnings reports from JPMorgan and Wells Fargo.
Market movements included a 0.2% decline in the S&P 500, a 0.4% drop in the Nasdaq 100, a 0.3% decrease in the Dow Jones Industrial Average, a 0.3% rise in the Stoxx Europe 600, and little change in the MSCI World Index.
Currency markets saw minimal fluctuations, with the Bloomberg Dollar Spot Index holding steady, the euro remaining unchanged at $1.0974, the British pound slipping by 0.3% to $1.3080, and the Japanese yen strengthening by 0.4% to 148.12 per dollar.
In the cryptocurrency realm, Bitcoin rose by 0.8% to $63,120.38, while Ether climbed by 1.4% to $2,473.91.
Bond yields saw increases, with the yield on 10-year Treasuries jumping six basis points to 4.02%, Germany’s 10-year yield rising by three basis points to 2.24%, and Britain’s 10-year yield advancing seven basis points to 4.20%.
Commodities experienced mixed results, with West Texas Intermediate crude oil climbing by 1.5% to $75.46 a barrel, while spot gold fell by 0.3% to $2,646.92 an ounce.
This article was created with the support of Bloomberg Automation and was originally published by Bloomberg L.P.
