“Markets seem to see September as a coin flip between 25 and 50 basis points,” said Neil Dutta at Renaissance Macro Research. “I think going 25 bp risks the same market dynamic as skipping the July meeting. It’ll be fine until the next data point makes investors second guess the decision, fuelling bets the Fed is behind the curve. Go 50 when you can, not when you must.”
Treasury 10-year yields declined eight basis points to 3.76 per cent. Swap traders have fully priced in a quarter-point rate cut in September — and a more than 30 per cent chance of a half-point reduction. Over 100 basis points of easing is expected for the remaining three meetings this year.
US stocks gave up earlier gains as AI giant Nvidia plunged again for its worst two-day fall since October 22. Nvidia shares fell 1.7 per cent after the company said it had not been subpoenaed by the US Department of Justice in response to a report by Bloomberg News on Tuesday.
The S&P 500 closed 0.2 per cent lower at 5,520.07 points. The Nasdaq 100 lost 0.3 per cent, while the Dow Jones Industrial Average edged up 0.1 per cent.
Verizon Communications fell 3.4 per cent as investors heard it’s in advanced talks to acquire Frontier Communications Parent, according to a person familiar with the negotiations.
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Shares of US Steel plunged 17.5 per cent after reports that US President Joe Biden is preparing to block Nippon Steel’s $22 billion takeover of United States Steel.
Wall Street could be heading for a correction if the payrolls data comes in weak on Friday, according to Scott Rubner at Goldman Sachs.
The bank’s clients are already positioning for a negative technical setup for share prices in the second half of September, Rubner wrote, adding that he expects a risk-off move to begin on September 16. “A market correction may start to get traction if payrolls are weak,” he wrote.
Bank of America clients were net sellers of US equities for a second consecutive week, recording the biggest net sale of shares since late 2020 as uncertainty grows around the economic outlook.
Institutional, hedge fund, and retail clients all offloaded US stocks, with net sales totaling $US8 billion in the week ended August 30, quantitative strategists led by Jill Carey Hall said in a note.
Bond traders are bracing for wilder market swings in the US than in Europe amid signs the world’s largest economy is faltering.
Kristina Hooper at Invesco expects the Fed will cut only 25 basis points, but anticipates that would only be the start of what is likely to be a “very significant easing cycle.”
Bloomberg
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