Manufacturing index hits nine-month high, while bond yields rise amid hawkish Fed signals
US stocks rebounded on Friday, ending a five-day losing streak that had erased over US$1tn from share prices, as reported by BNN Bloomberg.
The Nasdaq 100 gained 1.7 percent, and the S&P 500 rose 1.3 percent, with traders buying the dip after a December selloff extended into the year’s first trading session.
According to Bloomberg, retail investors continued to support artificial intelligence (AI) stocks, with Nvidia Corporation seeing significant interest.
JPMorgan strategists, led by Nikolaos Panigirtzoglou, stated that the AI-led market boom is likely to persist as long as retail investors sustain inflows into AI-focused funds, including Invesco’s Nasdaq-tracking ETF (QQQ) and GraniteShares’ Nvidia-leveraged fund (NVDL).
The Institute for Supply Management (ISM) reported its manufacturing index at 49.3 in December, the highest level since March but still below 50, indicating contraction. The gauge for new orders rose to its strongest point since early 2022.
Richmond Fed President Tom Barkin’s comments about maintaining restrictive rates pushed the 10-year Treasury yield to 4.6 percent, while Treasuries dipped after the ISM report.
Adam Crisafulli of Vital Knowledge described the ISM data as “incrementally positive” but cautioned that it might reinforce concerns about hawkish monetary policies and elevated yields.
Volatility persisted earlier in the week, with the S&P 500 experiencing intraday gains before closing lower.
Holiday trading volumes amplified these fluctuations, reflecting investor uncertainty about economic resilience amid Federal Reserve Chair Jerome Powell’s hawkish pivot in December.
Investors are also focusing on political shifts, with Donald Trump’s second term as president beginning in less than three weeks.
Laura Cooper, a global investment strategist at Nuveen, told Bloomberg Television that “US exceptionalism will continue to be the dominant theme at least in the first half of the year.”
Economic risks include tariff proposals and labour disruptions.
Louis Navellier of Navellier & Associates highlighted concerns over Trump’s tariff plans and immigration policies, stating that these could “bring inflation risks” and disrupt labour markets.
In corporate news, President Joe Biden blocked Nippon Steel Corporation’s proposed US$14.1bn purchase of United States Steel Corporation.
Biden said the decision ensures US Steel remains “a proud American company.” Shares of US Steel fell 6.5 percent following the announcement.
Meanwhile, alcohol stocks, including Constellation Brands and Molson Coors, declined after the US Surgeon General recommended cancer warning labels on alcoholic beverages.
Chinese markets struggled, with the yuan breaching 7.3 per dollar and the 10-year bond yield hitting a record low of 1.6 percent.
Societe Generale strategist Kenneth Broux noted ongoing concerns about China’s growth outlook, saying, “We’ve seen three big days of selling, which is not really conducive to sentiment.”
In commodities, WTI crude oil extended its rally, reaching US$74 per barrel, while gold recorded its best weekly gain since November, despite a slight decline on Friday.
- Stocks:
- S&P 500 rose 1.3 percent.
- Nasdaq 100 increased by 1.7 percent.
- Dow Jones gained 0.8 percent.
- Currencies:
- US dollar weakened, with the euro rising 0.4 percent to $1.0308.
- British pound increased to $1.2429, up 0.4 percent.
- Bonds:
- 10-year Treasury yield climbed to 4.60 percent.
- Germany’s 10-year yield rose to 2.43 percent.
- Commodities:
- WTI crude rose 1.2 percent, closing at $74 a barrel.
- Gold fell slightly, ending at $2,638.43 an ounce.
