Stock Traders Put Fed Aside in Quarter-End Battle: Markets Wrap

(Bloomberg) -- Wall Street traders took Jerome Powell's hawkish signals in stride, with bond yields down and stocks fluctuating in one of the last few days of a quarter that saw a blistering artificial-intelligence rally.

The tug of war within the S&P 500's most-influential group dictated trading Wednesday, with a slide in chipmakers offsetting an advance in tech megacaps like Apple Inc. and Microsoft Corp. After the closing bell, Bank of America Corp. and Wells Fargo & Co. led gains in financial companies as the biggest lenders passed the Federal Reserve's annual stress test, clearing the way for payouts. Micron Technology Inc. jumped on an upbeat forecast.

“Quarter-end positioning could drive volatility through the end of the week,” said Mark Hackett, chief of investment research at Nationwide. “Investors are increasingly pricing in a soft landing. A reacceleration in earnings will be required to drive the next phase of the market move.”

Swap market bets on further tightening barely budged after the Fed's chief downplayed the odds of a recession while signaling officials could hike for two straight meetings, if needed.

‘Mega Force'

Mutual funds bought stocks for the first time since February in the past month as fear of missing out outweighed economic concerns, according to Barclays Plc strategists.

“FOMO has seen frustrated bears turning into reluctant bulls,” the strategists led by Emmanuel Cau wrote. “It is noteworthy that equities were being bought despite the negative economic and market outlook” of most investors.

Meantime, BlackRock Inc. introduced a bullish call on AI amid a rally that's putting the Nasdaq 100 on pace for its best-ever first half of a year.

“A mega force like AI can be a big driver of returns even when the macro environment is not your friend,” wrote strategists including Jean Boivin, Wei Li and Vivek Paul. “A longer-term investor can look past some of the near-term pain.”

In other corporate news, General Mills Inc. fell after the food producer gave a guidance that suggests price hikes will no longer make up for slowing sales as inflation-weary shoppers cut back on spending. Netflix Inc. gained as Oppenheimer raised its price target.

Elsewhere, oil rose after a US government report showed nationwide stockpiles fell the most in two months, outpacing market expectations.  

Key events this week:

• Eurozone economic confidence, consumer confidence, Thursday
• US GDP, initial jobless claims, Thursday
• Atlanta Fed President Rafael Bostic speaks, Thursday
• China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday
• US personal income and spending, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 4 p.m. New York time
• The Nasdaq 100 rose 0.1%
• The Dow Jones Industrial Average fell 0.2%
• The MSCI World index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.4% to $1.0915
• The British pound fell 0.8% to $1.2641
• The Japanese yen fell 0.2% to 144.43 per dollar

Cryptocurrencies

• Bitcoin fell 1.8% to $30,106.98
• Ether fell 3.2% to $1,832.1

Bonds

• The yield on 10-year Treasuries declined five basis points to 3.71%
• Germany's 10-year yield declined four basis points to 2.32%
• Britain's 10-year yield declined six basis points to 4.32%

Commodities

• West Texas Intermediate crude rose 2.2% to $69.21 a barrel
• Gold futures fell 0.3% to $1,918.40 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Brett Miller, Tassia Sipahutar, Sujata Rao, Denitsa Tsekova, Isabelle Lee and Peyton Forte.

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