US Stocks Rally on Positive Data and Central Bank Actions

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks moved higher on Monday, following their European counterparts, as markets looked ahead to key data and actions from central banks.

The S&P 500 appeared set to snap a four-session losing streak, bouncing back along with the Dow from its biggest weekly percentage loss since March 2022.

The tech-laden Nasdaq staged a comeback after suffering its largest Friday-to-Friday decline since January 2022 last week.

“Corrections or profit-taking tend to be followed by stronger markets and I think that’s what we’re seeing today,” Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York, said. “It’s somewhat of an oversold market, and not on a lot of news.”

“Buyers are coming in and snapping up bargains,” Ghriskey added.

Last week a mixed bag of data, particularly the August employment report, caused investors to dial back expectations that the U.S. Federal Reserve could issue an outsized 50 basis point rate cut when it convenes for its policy meeting next week.

On Wednesday, the Labor Department’s Consumer Price Index is expected to show underlying inflation remains on its meandering path back down toward the central bank’s 2% goal.

At last glance, financial markets have baked in a 73% likelihood that the Fed will lower its key policy rate by 25 basis points at the conclusion of next week’s meeting, with a 27% probability of a 50 basis point reduction, according to CME’s FedWatch tool.

“The Fed is seemingly ready to lower interest rates, and I think it’ll be at a measured pace,” Ghriskey said. “Speculation of a 50-basis-point cut is probably excessive, but it’s an overhanging positive event that market is quick to discount.”

The Dow Jones Industrial Average rose 364.86 points, or 0.9%, to 40,710.27, the S&P 500 gained 30.78 points, or 0.57%, to 5,439.2 and the Nasdaq Composite added 52.89 points, or 0.32%, to 16,743.72.

European stocks staged a comeback after the benchmark STOXX 600 had its worst day in over a year on Friday, as investors look forward to economic data and an expected interest rate cut from the European Central Bank later in the week.

The pan-European STOXX 600 index rose 0.75% and MSCI’s gauge of stocks across the globe gained 0.22%.

Emerging market stocks lost 1.08%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.17% lower, while Japan’s Nikkei lost 0.48%.

Here’s a look at world stock indexes as of Friday’s close:

U.S. Treasury yields steadied after investors took profits after a bond rally amid uncertainty over the size of the Fed’s expected interest rate cut this month.

Benchmark 10-year notes last rose 1/32 in price to yield 3.7079%, from 3.71% late on Friday.

The 30-year bond last rose 5/32 in price to yield 4.0119%, from 4.02% late on Friday.

The dollar regained strength against a basket of world currencies as investors looked ahead to key inflation data and pared expectations regarding the size of next week’s policy rate cut.

The dollar index rose 0.4%, with the euro down 0.37% to $1.1042.

The Japanese yen weakened 0.31% versus the greenback at 142.76 per dollar, while Sterling was last trading at $1.3079, down 0.34% on the day.

Crude rose as concerns over supply pressures due to a potential hurricane helped oil prices rebound from last week’s heavy losses.

U.S. crude rose 1.2% to $68.48 per barrel and Brent was last at $71.64, up 0.82% on the day.

Gold prices pared earlier gains. Spot gold was last essentially unchanged at $2,496.88 an ounce.

(Reporting by Stephen Culp; Additional reporting by Nell Mackenzie and Wayne Cole in London; Editing by Andrew Heavens)

Wall Street follows world stocks higher ahead of central bank actions