U.S. stocks are starting the week in positive territory, extending last week's advance that snapped a three-week losing streak. Equity and economic news is light, but is set to heat up this week, beginning with tomorrow's consumer price inflation report that will commence the development of the August inflation picture. However, Bristol-Myers Squibb is rallying after the U.S. Food & Drug Administration approved the company's oral treatment for plaque psoriasis, while August retail sales and a preliminary look at September consumer sentiment are also due out this week. Treasury yields are declining, and the U.S. dollar continues to pull back from its recent rally to multi-decade highs, which seemed to boost the global markets. Crude oil and gold prices are trading higher. Asia finished broadly higher though many markets were closed for holidays, and Europe is seeing widespread gains despite data and some hawkish monetary policy comments on both sides of the pond.
At 10:55 a.m. ET, the Dow Jones Industrial Average is up 0.9%, the S&P 500 Index is rising 1.1%, and the Nasdaq Composite is increasing 1.0%. WTI crude oil is gaining $1.67 to $88.46 per barrel, and Brent crude oil is advancing $1.80 at $94.64 per barrel. The gold spot price is trading $11.50 higher to $1,740.10 per ounce, and the Dollar Index is falling 0.8% to 108.22.
Bristol-Myers Squibb Company (BMY $74) is rallying after the U.S. Food & Drug Administration (FDA) approved the company's oral treatment for plaque psoriasis.
The S&P 500 Index snapped a three-straight week losing streak last week, even as expectations remain elevated regarding continued tighter monetary policy by the Fed amid the backdrop of slowing economic growth. The August employment report also fostered some volatility, and Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest article, Are Jobs Livin' on the Edge?, how the August jobs report delivered something for both economic bulls and bears, but what matters more in the near term is the Fed's focus on seeing a continued easing in labor demand.
Treasury yields lower and U.S. dollar continues to pull back
Treasury yields are lower, with the yield on the 2-year note decreasing 5 basis points (bps) to 3.52%, the yield on the 10-year note declining 3 bps to 3.29%, and the 30-year bond rate trading 2 bps lower to 3.44%.
The markets continue to grapple with how much will the Fed remain aggressive with its monetary policy as containing inflation remains top priority. The U.S. dollar continues to pull back from a recent rally to multi-year highs.
Schwab's Chief Fixed Income Strategist Kathy Jones discusses in our Schwab Market Perspective: Mixed Signals, how the Fed has embarked on one of the most rapid tightening cycles in over 40 years, and with inflation continuing to outpace wage growth, more rate hikes are likely on the horizon. Kathy also offers analysis of the greenback in her commentary, The Strong Dollar: Can It Continue?
The economic calendar is void of any major releases today, but the docket will likely command heavy attention this week with the September 21 Fed monetary policy decision looming. The August inflation picture will develop and could headline the week, courtesy of tomorrow's Consumer Price Index (CPI), which will be followed by the Producer Price Index (PPI), and the Import Price Index. The spotlight on the all-important U.S. consumer will also shine, in the form of August retail sales and the preliminary September University of Michigan Consumer Sentiment Index. The calendar will also deliver some other timely reports that could move the markets, such as September regional manufacturing reports out of New York and Philadelphia, as well as initial jobless claims for the week ended September 10. Finally, the Fedspeak will go quiet during the week prior to the Central Bank's monetary policy decision.
Europe beginning the week in positive fashion
Stocks in Europe are advancing broadly in late-day trading, beginning the week in positive fashion despite some softer-than-expected data and expectations of tighter monetary policies on both sides of the pond. After the European Central Bank (ECB) last week hiked its benchmark interest rates by 75 bps, its highest ever increase, some ECB officials suggested the central bank will remain aggressive in coming meetings. Also, expectations remain high that the Fed in the U.S. will continue to aggressively tighten policy on the heels of last week's hawkish commentary from Fed Chairman Jerome Powell. Inflation pressures have forced central banks to be aggressive and have been exacerbated by an energy crisis in the region that has ensued amid the ongoing war in Ukraine, amplified by Russia shutting off energy supplies to Europe through the Nord Stream 1 pipeline indefinitely last week. Meanwhile the markets are awaiting this week's key August inflation data out of the U.S., which kicks off tomorrow. The U.S. dollar continues to pull back from multi-decade highs, which seems to be also easing some of the global skittishness. The euro and British pound are rallying versus the greenback. Bond yields in the Eurozone and U.K. are trading lower. Equities are shrugging off some softer-than-expected July U.K. economic data, with July GDP growth, industrial and manufacturing production, and construction output all coming in below estimates.
Amid the backdrop of elevated inflation pressures, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his article, Shortages Have Led to Gluts, how inventory gluts have been bad news for the stocks of companies experiencing them, but could also be indicating an inflation peak, which tends to be an ingredient for market bottoms. Also, Jeff discusses in his article, The End of Rate Hikes?, how the signals from central banks that rate hikes, which began last year, may be coming to an end could be welcome news for investors looking ahead to the next 12 months. .
The U.K. FTSE 100 Index is up 1.7%, France's CAC-40 Index is rising 2.1%, Germany's DAX Index is rallying 2.5%, Italy's FTSE MIB Index is gaining 2.4%, Spain's IBEX 35 Index is increasing 2.1%, and Switzerland's Swiss Market Index is advancing 1.0%.
Asia higher to begin the week
Stocks in Asia finished higher to kick off the week, with the continued pullback in the U.S. dollar, which has jumped recently to multi-decade highs, appearing to ease sentiment in the region. However, volume was lighter than usual as markets in mainland China, Hong Kong, and South Korea were closed for holidays. Travel-related stocks in Japan were boosted by reports that the country could ease restrictions on overseas visitors, while the continued stabilization in the yen also helped boost Japanese equities. However, caution likely reigned ahead this week's key U.S. inflation reports as the markets look to see if the Central Bank will remain aggressive. In economic news, China reported that its aggregate financing—a measure of total credit issued—jumped much more than expected in August, while its new yuan loans came in below expectations. Just as the markets were closing, Japan reported that its preliminary machine tool orders for August accelerated solidly.
With central banks in North America, Europe, and the U.K. aggressively tightening monetary policies, the Bank of Japan (BoJ) has abstained and China's central bank has diverged and actually loosened its policy recently. The moves come as China has continued to deploy COVID-related restrictions in parts of the country, which has negatively impacted economic growth. China, the world's second-largest economy, has also been hampered by real estate struggles, regulatory crackdowns, and geopolitical tensions with the U.S. Schwab's Jeffrey Kleintop provides commentary on China's situation in his latest article, China Q&A: Top 5 Questions, discussing various topics including inflationary concerns, currency movements, government policies, and more.
Japan's Nikkei 225 Index rose 1.2%, with the yen holding onto Friday's gain versus the U.S. dollar. The yen has come off multi-decade lows versus the greenback following a sharp drop that began in March amid the BoJ's lack of keeping up with other key global central banks in monetary policy. India's S&P BSE Sensex 30 Index moved 0.5% to the upside, and Australia's S&P/ASX 200 Index advanced 1.0%.
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