Equities in Sydney and Tokyo fluctuated. Futures for US stocks were little changed after the S&P 500 closed 0.1% higher and the Nasdaq 100 slid 0.5%, with investors maintaining a rotation out of the tech megacaps that has powered the bull market in stocks. Markets in China and South Korea remain shut for public holidays.
The dollar held around its lowest level since January as traders position for a potentially large interest-rate cut from the Fed Wednesday. Treasury 10-year yields were steady after dropping on Monday.
Money continued to flow into economically sensitive corners of the market, even as bond traders remained divided about whether policymakers will cut interest rates by a quarter point or a half point on Wednesday. Except for the central bank’s emergency rate cut in March 2020 at the onset of the pandemic, that’s the greatest amount of doubt in interest-rate swap markets for any scheduled Fed decision since 2007, according to data compiled by Bloomberg.
Still, strategists from Morgan Stanley to Goldman Sachs Group Inc. and JPMorgan Chase & Co. are saying that the size of the reduction is less relevant for stocks than the health of the US economy.
“We’re getting a rate cut of some sort this week absent an act of God,” said Callie Cox at Ritholtz Wealth Management. “The economic impact of one rate cut – regardless of whether it’s 25 or 50 basis points – will likely be insignificant. The path and degree of cuts over the next year or so matters the most.”
In Asia, where markets in Indonesia and Malaysia will reopen after being shut Monday, concern is growing about the strength of China’s economy. Disappointing economic data over the weekend is adding pressure on the authorities to ramp up fiscal and monetary stimulus if the nation is to reach this year’s growth target.
Investors will be on the watch for the trading debut of Chinese appliance giant Midea Group Co. in Hong Kong, after robust demand for the biggest public stock offering in three years revives hopes for the city’s languishing market.
Meanwhile, the yen was steady after strengthening beyond 140 per dollar for the first time since July 2023 on Monday as the Japanese currency extended its rally from the weakest point in nearly 38 years in July. The Bank of Japan is expected to stay on hold on Friday after raising rates twice this year.
The Bloomberg “Magnificent Seven” gauge of megacaps slipped 0.7% on Monday. The Russell 2000 of small firms added 0.3%. Microsoft Corp. unveiled a $60 billion stock-buyback program, matching its largest-ever repurchase authorization, and raised its quarterly dividend 10%. The shares rose less than 1% in extended trading.
“We remain positive on equities,” said John Stoltzfus at Oppenheimer Asset Management. “The broad rotation which began in the rally from last year’s S&P 500 low has deflected volatility repeatedly. Pullbacks experienced thus far this year have mostly looked like ‘trims’ and ‘haircuts’ for the S&P 500.”
BloombergIn Asia, where markets in Indonesia and Malaysia will reopen after being shut Monday, concern is growing about the strength of China’s economy. Disappointing economic data over the weekend is adding pressure on the authorities to ramp up fiscal and monetary stimulus if the nation is to reach this year’s growth target.
Investors will be on the watch for the trading debut of Chinese appliance giant Midea Group Co. in Hong Kong, after robust demand for the biggest public stock offering in three years revives hopes for the city’s languishing market.
Meanwhile, the yen was steady after strengthening beyond 140 per dollar for the first time since July 2023 on Monday as the Japanese currency extended its rally from the weakest point in nearly 38 years in July. The Bank of Japan is expected to stay on hold on Friday after raising rates twice this year.
The Bloomberg “Magnificent Seven” gauge of megacaps slipped 0.7% on Monday. The Russell 2000 of small firms added 0.3%. Microsoft Corp. unveiled a $60 billion stock-buyback program, matching its largest-ever repurchase authorization, and raised its quarterly dividend 10%. The shares rose less than 1% in extended trading.
“We remain positive on equities,” said John Stoltzfus at Oppenheimer Asset Management. “The broad rotation which began in the rally from last year’s S&P 500 low has deflected volatility repeatedly. Pullbacks experienced thus far this year have mostly looked like ‘trims’ and ‘haircuts’ for the S&P 500.”