Stocks See Small Moves In Run-Up To Debt Talks: Markets Wrap

(Bloomberg) -- The stock market saw small moves, with investors waiting for clarity on whether Washington lawmakers will reach a deal to avert a US default.

Equity gains were capped on the eve of a meeting between President Joe Biden and House Speaker Kevin McCarthy, with both sides sending mixed signals. The Nasdaq 100 outperformed as speculation the Federal Reserve is close to halting its rate hikes renewed investor appetite for tech megacaps. The approval of Microsoft Corp.’s $69 billion takeover of Activision Blizzard Inc. by the European Union also helped sentiment.

Equities fell earlier in the session after a New York manufacturing index plunged the most since April 2020.

“There is little conviction on either side as the market continues to digest earnings, a slew of economic data, and finger-pointing in Washington regarding the debt ceiling discussions,” said Craig Johnson, chief market technician at Piper Sandler.

To Chris Larkin at E*Trade from Morgan Stanley, it’s fair to ask whether the low equity volatility suggests the market is being too complacent — especially after the US benchmark notched its narrowest non-holiday weekly range since August 2021. “A debt default may not be the most likely scenario, but any prolonged debate or unexpected development has the potential to trigger higher volatility,” he noted.

Morgan Stanley’s Michael Wilson expects the debate around raising the US government’s $31.4 trillion borrowing limit to trigger some sharp swings in equity markets. Most clients “believe it will ultimately get resolved, but not without some near-term volatility,” Wilson wrote in a note, adding that many have framed the event as “a lose-lose for markets.”

Meantime, two Fed officials signaled they favored pausing interest-rate increases, while a third policymaker said the central bank’s task in subduing inflation was not complete.

Key events this week:

• China retail sales, industrial production, Tuesday
• Eurozone GDP, Tuesday
• US retail sales, industrial production, business inventories, Tuesday
• Fed speakers include Cleveland’s Loretta Mester, New York’s John Williams, Atlanta’s Raphael Bostic and Chicago’s Austan Goolsbee, Tuesday
• Eurozone CPI, Wednesday
• BOE Governor Andrew Bailey delivers keynote speech, Wednesday
• US housing starts, Wednesday
• US initial jobless claims, Conference Board leading index, existing home sales, Thursday
• Japan CPI, Friday
• ECB President Christine Lagarde participates in panel at Brazil central bank conference, Friday
• New York Fed’s John Williams speaks at monetary policy research conference in Washington; Fed Chair Jerome Powell and former chair Ben Bernanke to take part in panel discussion, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 2:51 p.m. New York time
• The Nasdaq 100 rose 0.4%
• The Dow Jones Industrial Average was little changed
• The MSCI World index rose 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.2% to $1.0874
• The British pound rose 0.6% to $1.2527
• The Japanese yen fell 0.3% to 136.06 per dollar

Cryptocurrencies

• Bitcoin rose 1.9% to $27,455.75
• Ether rose 1.8% to $1,830.78

Bonds

• The yield on 10-year Treasuries advanced four basis points to 3.50%
• Germany’s 10-year yield advanced three basis points to 2.31%
• Britain’s 10-year yield advanced four basis points to 3.82%

Commodities

• West Texas Intermediate crude rose 1.6% to $71.13 a barrel
• Gold futures were little changed

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Isabelle Lee, Peyton Forte and Carly Wanna.

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