Stocks Rise as Dollar on Track for Highest in Year: Markets Wrap
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(Bloomberg) — Stocks extended their post-election advance and the dollar was on track for a one-year high, with traders awaiting this week’s key inflation data for clues on the Federal Reserve’s next steps.
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Equities rose for a fifth straight session, with the S&P 500 hitting the 6,000 mark and heading toward its 51st record this year. Megacaps were mixed, with Tesla Inc. up and Apple Inc. down. The Russell 2000 of small caps climbed 1.2%. The Treasury cash market was closed due to a US holiday. Bitcoin rallied past $82,000 for the first time, boosted by President-elect Donald Trump’s embrace of digital assets.
US inflation probably moved sideways at best in October, highlighting the uneven path of easing price pressures in the home stretch toward the Fed’s target. The core consumer price index due on Wednesday, which excludes food and energy, likely rose at the same pace on both a monthly and annual basis compared to September’s readings.
“With the election and another rate cut in the rear-view mirror, the question is whether bulls can keep pushing the market to new highs,” said Chris Larkin at E*Trade from Morgan Stanley. “Aside from any potential profit-taking after such a strong surge, this week’s inflation data may determine whether the market pads its gains.”
The S&P 500 rose 0.2%. The Nasdaq 100 fell 0.2%. The Dow Jones Industrial Average gained 1%.
Treasury futures were marginally lower. The Bloomberg Dollar Spot Index rose 0.7%. Bitcoin options traders are already eyeing a landmark price of $100,000 for the original cryptocurrency, after it surged to a fresh record on hopes for a more crypto-friendly administration.
Oil sank as soft demand in major importer China and a stronger greenback dampened the outlook for crude.
US equities look a bit stretched from a valuation, positioning and sentiment perspective, according to Lori Calvasina at RBC Capital Markets.
She says valuations have not yet peaked on either the S&P 500 nor the Russell 2000 index, but notes there’s far less room to expand going forward.
The sustainability of the stock rally following the US election win will depend on the behavior of the bond market, according to JPMorgan Chase & Co. strategists led by Mislav Matejka. Yields approaching 5% could prove trickier for risk assets to digest, they said.
Corporate earnings are set to become one of the biggest drivers of US stocks as investor focus returns to economic growth following the election.
With the third-quarter reporting season in its final stage, S&P 500 companies have posted an 8.4% increase in profits — double the expected increase, according to data compiled by Bloomberg Intelligence. Wall Street is even more optimistic for next year, as analysts expect earnings to jump 13% in the biggest increase since 2021, according to BI.
“Last week was a big one for the financial markets, and this one has started the way last one ended,” said Fawad Razaqzada at City Index and Forex.com. “Despite predictions of a close race, Trump secured a sweeping victory, with Democrats taking most of the swing states and achieving a decisive win. This helped to fuel a rally in stocks, cryptos and the dollar, with the latter fueled further by resilient economic indicators.”
The upcoming CPI release on Wednesday could further support the dollar if it indicates rising price pressures, given that high inflation might deter the Fed from further loosening its monetary policy, he said.
Sam Stovall at CFRA says that it now appears that a “Red Wave,” or full Republican control of both the executive and legislative branches is the likeliest outcome of the election.
“Contrary to popular belief that the S&P 500 recorded its best returns when Congress was in gridlock, a ‘Red Wave’ historically saw the S&P 500 post its highest average calendar-year price increase for a Republican president at nearly 13%,” he said. “Also, the Russell 2000 typically benefited from a Red Wave, rising an average of close to 14%, since 1980.”
The best return under a Democratic president indeed occurred under a split-Congress scenario, when the S&P 500 posted an average gain of 16.6%, Stovall concluded.
Corporate Highlights:
Nvidia Corp. was promoted to top large-cap pick at Piper Sandler, which highlighted the artificial intelligence-focused chipmaker’s dominant position in AI accelerators, as well as the upcoming launch of its new Blackwell chip.
Cigna Group said it won’t pursue a combination with rival insurer Humana Inc. after reports the two companies had renewed discussions of a deal.
AbbVie Inc. tumbled after two mid-stage trials of its drug to treat schizophrenia failed to meet their primary goal, a blow to the company’s $8.7 billion acquisition of Cerevel Therapeutics earlier this year.
MicroStrategy Inc. purchased about 27,200 Bitcoin for around $2.03 billion, in one of the largest acquisitions of the digital asset by the crypto hedge-fund proxy.
Key events this week:
Germany CPI, ZEW survey, Tuesday
Fed speakers include Christopher Waller, Patrick Harker and Neel Kashkari, Tuesday
Fed issues survey of senior bank loan officers, Tuesday
Eurozone industrial production, Wednesday
US CPI, Wednesday
Fed speakers include Jeffrey Schmid, Lorie Logan, Neel Kashkari and Alberto Musalem, Wednesday
Eurozone GDP, Thursday
US PPI, jobless claims, Thursday
Walt Disney earnings, Thursday
Fed speakers include Jerome Powell, John Williams and Adriana Kugler, Thursday
China retail sales, industrial production, Friday
US retail sales, Empire manufacturing, industrial production, Friday
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.2% as of 9:56 a.m. New York time
The Nasdaq 100 fell 0.2%
The Dow Jones Industrial Average rose 1%
The Stoxx Europe 600 rose 1.2%
The MSCI World Index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index rose 0.7%
The euro fell 0.8% to $1.0636
The British pound fell 0.5% to $1.2862
The Japanese yen fell 0.8% to 153.88 per dollar
Cryptocurrencies
Bitcoin rose 3.2% to $82,504.2
Ether rose 0.2% to $3,178.71
Bonds
The yield on 10-year Treasuries was little changed at 4.30%
Germany’s 10-year yield declined two basis points to 2.34%
Britain’s 10-year yield advanced two basis points to 4.45%
Commodities
West Texas Intermediate crude fell 2.4% to $68.66 a barrel
Spot gold fell 2.3% to $2,622.34 an ounce
This story was produced with the assistance of Bloomberg Automation.
