Stock Traders Step In After Rout; Dollar Climbs: Markets Wrap

On Sep 29, 2021

(Bloomberg) — The crowd of dip buyers returned to equity markets amid speculation that the worst selloff since May had gone too far.

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Most major groups in the S&P 500 rose, with defensive industries like utilities and consumer staples outperforming technology. The dollar rose to the highest level since November 2020, while Treasuries fluctuated.

During a European Central Bank panel, Federal Reserve Chairman Jerome Powell blamed inflation woes on stubborn supply-chain snags, adding that he expects the bottlenecks to ease over the next few months. President Joe Biden’s economic agenda faces a pivotal day in Congress, with the prospects growing of a setback for his infrastructure bill and markets beginning to take notice of the intensifying debt-ceiling standoff with Republicans.

“Dip buyers are out in force boosting stocks as Treasury yields ease slightly,” said Fiona Cincotta, senior financial-markets analyst at City Index. “Whilst stocks are rising today, the outlook is less clear. Jitters surrounding elevated levels of inflation and slowing growth are likely to remain for some time. U.S. debt-ceiling discussions could be in focus amid a quiet economic calendar.”

President Joe Biden’s economic agenda faces a pivotal day in Congress Wednesday, with the prospects growing of a setback for his infrastructure bill and markets beginning to take notice of the intensifying debt-ceiling standoff with Republicans.

QuickTake: What’s the Debt Ceiling and Will the U.S. Raise It?

A majority of investors harbor fears of persistently high inflation, with a 20% pullback in stocks seen as more likely than a 20% rally, according to a Citigroup Inc. survey of clients. Though most expected modest gains next year in the S&P 500, price pressures and a policy reversal by the Fed are big risks, according to the survey of more than 90 pension, mutual and hedge funds this month.

A gauge of U.S. pending home sales rebounded in August to a seven-month high as prospective buyers welcomed more attractive pricing and additional inventory. The figures suggest housing activity is firming after retreating from the record-high levels seen last year.

Some corporate highlights:

Apple Inc. is seeing stronger-than-expected sell-through for its iPhone 13 series, according to KGI Securities, which reiterates an outperform rating on the stock.
Boeing Co. rallied after the aerospace giant was upgraded to outperform at Bernstein on prospects of a travel rebound.
Dollar Tree Inc. surged after the discount retailer’s board increased its buyback authorization to $2.5 billion.
Morgan Stanley slumped after Oppenheimer downgraded the shares, citing a lack of upside to its valuation.

Here are some events to watch this week:

House Financial Services Committee hearing on the Fed, Treasury’s pandemic response, Thursday
China Caixin manufacturing PMI, non-manufacturing PMI, Thursday
Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending,…