(Bloomberg) -- A slide in some megacaps weighed on stocks, which almost erased gains that were earlier driven by bets the Federal Reserve is close to ending its hiking cycle.
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The S&P 500 edged slightly higher after rallying on the heels of data showing a cooling jobs market. Tesla Inc. dropped about 4%, leading losses in big tech. Treasury yields rose after a report signaled the malaise in manufacturing is no longer deepening. Some traders also cited remarks from Fed Bank of Cleveland President Loretta Mester, who said US inflation remains too high despite improvements, and the labor market is still strong.
Nonfarm payrolls rose 187,000 after the prior two months were revised significantly lower. The unemployment rate rose to 3.8%, partly reflecting a pickup in labor-force participation, and average hourly earnings rose just 0.2% — the most-tepid increase since February 2022.
Swap contracts priced in a less than 50% chance of another rate hike this year — while wagers on a rate cut were shifted to May from June.
“With wage growth likely to ease and further disinflationary pressures in the pipeline, the case for a Fed pause at this month’s meeting is now overwhelming,” said Hussain Mehdi, a strategist at HSBC Asset Management. “But we think it will be difficult to dodge recession next year as the lagged impact of the Fed’s aggressive tightening cycle continues to feed through and corporate retrenchment gathers pace. Therefore, we maintain a cautious and defensive stance in portfolios.”
The Fed may very well be done hiking rates for now, but US stocks still face a pullback from the risk of a hard economic landing, according to Bank of America Corp. strategist Michael Hartnett.
“Sell the last rate hike,” Hartnett wrote. The strategist correctly predicted the US stock slump last year, and has remained bearish in 2023.
Meantime, Nouriel Roubini, whose doom-laden predictions accompanied key episodes of the 2008 global financial crisis, warned of a potential overvaluation in stocks.
“A 10% correction is not totally unlikely if the economy starts to soften up globally, and if you have still inflation that is essentially above target,” he told Francine Lacqua on Bloomberg Television.
Corporate Highlights:
Tesla revamped the Model 3 sedan with sleeker looks and longer range while slashing prices of its premium vehicles in an all-out push to boost sales.
Amgen Inc. can move forward with its $27.8 billion takeover of Horizon Therapeutics Plc after the US Federal Trade Commission said Friday that it accepted a binding settlement that the combined company won’t bundle together two of Horizon’s blockbuster drugs.
Walgreens Boots Alliance Inc.’s Rosalind Brewer stepped down from her post as chief executive officer and board member during a rocky shift to a wider offering of health-care services while the shares have plunged.
Dell Technologies Inc. climbed after reporting better-than-expected sales of personal computers and data center hardware.
Broadcom Inc., a supplier of chips to Apple Inc. and a broad swath of the tech industry, fell on a bearish outlook.
Lululemon Athletica Inc. rose after lifting its full-year outlook as it takes business from competitors and defies the broader retail slump.
US-listed Chinese stocks advanced after Beijing and Shanghai both ease housing rules, a sign of further government support toward the economy.
Some of the main moves in markets:
Stocks
The S&P 500 rose 0.1% as of 11:28 a.m. New York time
The Nasdaq 100 fell 0.1%
The Dow Jones Industrial Average rose 0.2%
The Stoxx Europe 600 was little changed
The MSCI World index rose 0.1%
Currencies
The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.5% to $1.0793
The British pound fell 0.6% to $1.2601
The Japanese yen fell 0.4% to 146.16 per dollar
Cryptocurrencies
Bitcoin fell 0.6% to $25,854
Ether fell 0.8% to $1,636.72
Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.18%
Germany’s 10-year yield advanced eight basis points to 2.54%
Britain’s 10-year yield advanced six basis points to 4.42%
Commodities
West Texas Intermediate crude rose 1.6% to $84.93 a barrel
Gold futures fell 0.1% to $1,963.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Michael Mackenzie, Isabelle Lee and Emily Graffeo.
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2023-09-01 15:06:34Z
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