Wall St gains, Treasury yields drop as data raises potential for Fed pause

By Stephen Culp

August 29, 202311:03 AM EDTUpdated 2 hours ago

[1/2]Signage for the London Stock Exchange Group is seen outside of offices in Canary Wharf in London, Britain, August 3, 2023. REUTERS/Toby Melville/File Photo Acquire Licensing Rights

NEW YORK, Aug 29 (Reuters) – Wall Street extended the previous day’s gains on Tuesday while the dollar see-sawed amid light, pre-Labor Day trading as investors continued to adjust their expectations for U.S. monetary policy.

After an uncertain start, all three major U.S. stock indexes coalesced to a modest advance, as investors looked ahead to economic data later this week that could sway the Federal Reserve’s interest rate decisions in the coming months.

“If (the data) continues to go in the right direction there’s a chance the Fed might hold interest rates,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “The Fed continues to talk tough, but its action depends on inflation.”

A smattering of U.S. economic data released on Tuesday showed dampening consumer sentiment and a bigger-than-expected drop in job openings, offering evidence that the central bank’s efforts to rein in inflation by throwing cold water on the economy is having its intended effect.

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But as market participants drift toward a three-day holiday weekend, volumes are likely to be unusually light, which can lend itself to increased volatility.

Data due as the week draws to a close include August payrolls, July PCE inflation and the Commerce Department’s second take on April-June GDP.

“We’ll probably see the real reaction to the data next Tuesday, because of the holidays,” Cardillo added. “We’re entering September which is generally a precarious month for stocks.”

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The Dow Jones Industrial Average (.DJI) rose 77.08 points, or 0.22%, to 34,637.06, the S&P 500 (.SPX) gained 31.92 points, or 0.72%, to 4,465.23 and the Nasdaq Composite (.IXIC) added 169.69 points, or 1.24%, to 13,874.82.

European shares extended their rally with a boost from the mining sector as Beijing’s recent policy moves to jump-start China’s languid economy fueled demand hopes.

The pan-European STOXX 600 index (.STOXX) rose 0.92% and MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.83%.

Emerging market stocks rose 0.96%. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 1.17% higher, while Japan’s Nikkei (.N225) rose 0.18%.

U.S. Treasury yields extended Monday’s decline, with 10-year notes touching near three-week lows.

Benchmark 10-year notes last rose 16/32 in price to yield 4.151%, down from 4.212% late on Monday.

The 30-year bond last rose 22/32 in price to yield 4.2482%, from 4.289% late on Monday.

The dollar fluctuated against a basket of world currencies, giving up earlier gains after job openings data bolstered the case for a Fed pause, while the Japanese yen hovered near levels that provoked intervention last year.

The dollar index (.DXY) fell 0.24%, with the euro up 0.14% to $1.0832.

The yen strengthened 0.04% versus the greenback at 146.48 per dollar but still hovered close to last year’s intervention range, while sterling was last trading at $1.2595, down 0.06% on the day.

Oil prices steadied as supply concerns resulting from a hurricane churning off the U.S. Gulf coast counterbalanced concerns over softening global demand.

U.S. crude fell 0.04% to $80.07 per barrel and Brent was last at $84.57, up 0.18% on the day.

Gold prices gathered upward momentum in the wake of weaker than expected U.S. data.

Spot gold added 0.7% to $1,932.39 an ounce.

Reporting by Stephen Culp; Editing by Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.