(Bloomberg) -- Another report showing the US economy entered the trade war on solid footing pushed stocks away from session lows, while President Donald Trump suggested that his administration could strike trade deals with some countries as soon as this week.
A rebound in industrial shares helped the S&P 500 erase most of a slide that earlier approached 1%. Data showing a pick-up in growth at US service providers helped assuage concerns of a recession even as the outcome of the US trade war has yet to be felt. While Trump signaled no imminent accord with China, the president said the Asian nation wants to make a deal “very badly.”
Attention will soon shift to Wednesday’s Fed decision after bond traders dialed back rate-cut bets that had steadily mounted as Trump’s trade war unleashed havoc in financial markets. As long as the economy holds firm, Jerome Powell and his colleagues can more easily justify the standing pat.
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“Uncertainty rules amid a trade war and the ever-changing landscape of tariffs, but with the hard data on consumer spending and employment still hanging in there, the Fed will remain firmly planted on the sidelines,” said Greg McBride at Bankrate.
The S&P 500 fell 0.1%. The Nasdaq 100 slid 0.1%. The Dow Jones Industrial Average added 0.3%. The yield on 10-year Treasuries rose six basis points to 4.36%. The Bloomberg Dollar Spot Index fell 0.1%.
Oil sank as OPEC+ agreed to a bumper output increase. Taiwan’s dollar surged the most since 1988 on bets authorities might allow it to appreciate to help reach a trade deal with the US.
Treasury Secretary Scott Bessent touted the US as the “premier destination” for global capital and argued that the Trump administration’s policies will solidify that position — countering the so-called sell America theme that materialized last month.
Concerns about the international appeal of dollar-based assets materialized last month during a selloff in stocks in the wake of Trump’s announcement of steep reciprocal tariffs on major trading partners. Contrary to typical practice, US Treasuries also tumbled — failing to play the haven asset role it has in the past.
“Clearly, it really is the uncertainty and the volatility — and so that is how clients are feeling globally, domestically. And as part of that, they’re trying to figure out: Is there opportunity in this market?” Racquel Oden at HSBC said at an event. “We’re seeing all these market swings, each day there’s a new report that may pivot things in the economy.”
After piling into short-term Treasuries, anticipating the Fed would start easing policy soon to contain the fallout, traders reversed course. Two-year yields rose for a third consecutive session - the longest run since December - as traders bet policymakers will remain in wait-and-see mode until there’s more clarity on the impacts of tariffs.
“We believe that the longer policy uncertainty persists, the greater the potential hit to economic activity,” said Invesco’s Global Market Strategy Office.
“Tariff clock is ticking, and the Trump administration has a fairly limited window to make progress on trade deals before the economic damage becomes more pervasive and less reversible,” said Dave Grecsek, managing director at Aspiriant. “The longer trade policy uncertainty lingers, the more economic damage accumulates.”
A trade deal with China would be a prerequisite to spur the S&P 500 to a new all-time high in the near term, according to strategists at Morgan Stanley.
The team led by Michael Wilson says a deal reached in the next few weeks would calm businesses that supply chains will face limited disruption going forward.
There are many reasons to doubt the recent rebound in US stocks, but it has at least one powerful factor on its side: momentum.
The S&P 500 notched its ninth-straight daily gain on Friday, the longest stretch since 2004. Such streaks have tended to precede further upside: The S&P 500 was a median 20% higher a year after moves of similar magnitude while notching gains in shorter-term periods along the way, according to WisdomTree’s Jeff Weniger, who analyzed data going back to the late 1980s.
Corporate Highlights:
Berkshire Hathaway Inc. followed Chief Executive Officer Warren Buffett’s recommendation, naming Vice Chairman Greg Abel to replace the billionaire as CEO, effective Jan. 1.
Tyson Foods Inc. slumped as investors shrugged off stronger-than-expected quarterly earnings to focus on deepening losses at the company’s beef business.
Shell Plc is working with advisers to evaluate a potential acquisition of BP Plc, though it’s waiting for further stock and oil price declines before deciding whether to pursue a bid, according to people familiar with the matter.
Sunoco LP agreed to acquire Parkland Corp. for about $9.1 billion, including debt, offering a premium for a Canadian fuel distributor that’s in the midst of a leadership upheaval and a fight with its largest shareholder.
Investment firm 3G Capital will acquire footwear maker Skechers USA Inc. for $9.4 billion.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.1% as of 2:08 p.m. New York time
The Nasdaq 100 fell 0.1%
The Dow Jones Industrial Average rose 0.3%
The MSCI World Index fell 0.2%
Bloomberg Magnificent 7 Total Return Index fell 0.4%
The Russell 2000 Index fell 0.1%
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.1303
The British pound was little changed at $1.3279
The Japanese yen rose 0.6% to 144.09 per dollar
Cryptocurrencies
Bitcoin fell 1.2% to $94,630.11
Ether fell 1.2% to $1,814.98
Bonds
The yield on 10-year Treasuries advanced six basis points to 4.36%
Germany’s 10-year yield declined two basis points to 2.52%
Britain’s 10-year yield advanced three basis points to 4.51%
Commodities
West Texas Intermediate crude fell 1.8% to $57.22 a barrel
Spot gold rose 2.3% to $3,316.59 an ounce
--With assistance from Vildana Hajric and Isabelle Lee.
