Stocks expand higher as target rises with earnings beat: Markets Wrap

(Bloomberg) — Stocks extended gains as investors welcomed cooler-than-expected inflation readings in the U.S. and U.K. as evidence that central banks may be winding down their aggressive interest rate hikes.

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Target Corp stock rose 14% in premarket trading as earnings beat estimates, reflecting fewer markdowns and better inventory management. Nasdaq 100 futures rose 0.6%, and S&P 500 futures rose 0.4%. Treasuries stabilized and the dollar stabilized after a sharp decline the previous day.

Markets are now looking to Wednesday’s data on US retail sales and producer prices for further confirmation that the economic slowdown will allow the Federal Reserve to stop tightening monetary policy. The Fed’s swaps suggest that the odds of another rate hike have fallen to almost zero – with the market pricing in a 50 basis point rate cut by July.

“If the Fed finishes raising interest rates, there will be a sense of relief that these significant headwinds to market appreciation have been removed,” said Matt Stuckey, equity portfolio manager at Northwestern Mutual Wealth Management Co.

However, if upcoming data, including retail sales, point only to a gradual economic slowdown, then “what we are likely to see is the Fed still on pause.”

London’s FTSE 100 rose 1% and the pound fell after UK inflation slowed more than expected, a similar result to Tuesday’s US price reading. This news has fueled optimism that the Bank of England has also finished raising interest rates.

In Asia, the MSCI regional equity index rose more than 2% as China stepped up economic support. The People’s Bank of China has injected the largest amount of cash into the banking system since 2016, providing 1.45 trillion yuan ($200 billion) in cash through medium-term lending facilities.

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Singapore iron ore futures reached $130 a tonne for the first time since March amid improving outlook for steel demand in China. That boosted European mining stocks, sending the industry up nearly 3% for the biggest advance in the Stoxx 600.

Main events this week:

• US Retail Sales, Business Inventories, Producer Price Index, Imperial Manufacturing, Wednesday

• New home prices in China, Thursday

• US Initial Jobless Claims, Industrial Production, Thursday

• Walmart earnings, Thursday

• US President Joe Biden and Chinese President Xi Jinping are expected to speak at the Asia-Pacific Economic Cooperation (APEC) leaders’ summit on Thursday.

• Cleveland Fed President Loretta Mester, New York Fed President John Williams and Fed Vice Chairman for Supervision Michael Barr speak Thursday.

• Bank of England Deputy Governor Dave Ramsden and European Central Bank President Christine Lagarde speak at the event on Thursday

• Housing starts in the US on Friday

• The US Congress faces a midnight deadline to pass the federal spending measure on Friday

• European Central Bank President Christine Lagarde speaks on Friday

• Chicago Fed President Austin Goolsbee, Boston Fed President Susan Collins and San Francisco Fed President Mary Daly speak Friday.

Some key movements in the markets:

Stores

• S&P 500 futures rose 0.3% as of 5:54 a.m. New York time

• Nasdaq 100 futures rose 0.5%

• Dow Jones Industrial Average futures rose 0.2%

• The Stoxx Europe 600 index rose 0.6%.

• MSCI World Index rises 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.2 percent to $1.0857

• The British pound fell 0.3 percent to $1.2461

• There was little change in the Japanese yen at 150.46 to the dollar

Digital currencies

• Bitcoin rose 0.8% to $35,875.96

• Ethereum rose 0.3% to $1,988.71

Bonds

• The yield on 10-year Treasury bonds rose two basis points to 4.47%.

• The yield on 10-year German bonds was little changed at 2.60%.

• The yield on British 10-year bonds rose two basis points to 4.17%.

Goods

• West Texas Intermediate crude fell 0.4% to $77.89 a barrel

• Gold rose in spot transactions 0.5 percent to $1,973.14 per ounce

This story was produced with assistance from Bloomberg Automation.

Stores

• The Stoxx Europe 600 Index was up 0.7% as of 12:04 PM London time

• S&P 500 futures rose 0.4%

• Nasdaq 100 futures rose 0.6%.

• Dow Jones Industrial Average futures rose 0.3%

• The MSCI Asia Pacific Stock Index rose 2.4%.

• MSCI Emerging Markets Index rises 2.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro fell 0.1 percent to $1.0866

• There was little change in the Japanese yen at 150.32 to the dollar

• There was little change in the yuan in external transactions at 7.2479 to the dollar

• The British pound fell 0.2 percent to $1.2473

Digital currencies

• Bitcoin rose 1.7% to $36,194.02

• Ether rose 1.6% to $2,013.3

Bonds

• The yield on 10-year Treasury bonds rose two basis points to 4.47%.

• The yield on 10-year German bonds was little changed at 2.60%.

• The yield on British 10-year bonds rose two basis points to 4.17%.

Goods

• Brent crude fell 0.4 percent to $82.18 a barrel

• Gold rose in spot transactions 0.4 percent to $1,973.10 per ounce

This story was produced with assistance from Bloomberg Automation.

-With assistance from Tasya Sibahutar and Winnie Hsu.

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