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  • Oil prices jump after drone attack kills U.S. troops, escalating Mideast crisis

    Oil prices jump after drone attack kills U.S. troops, escalating Mideast crisis


    Oil futures popped higher Sunday evening, after a drone attack that killed three U.S. service members in northern Jordan, blamed by the White House on Iran-backed militants, marked a major escalation of tensions in the Middle East.

    West Texas Intermediate crude for March delivery
    CL00,
    +1.22%

    CL.1,
    +1.22%

    CLH24,
    +1.22%
    was up $1.09, or 1.4%, at $79.10 a barrel on the New York Mercantile Exchange. March Brent crude
    BRN00,
    +1.15%

    BRNH24,
    +1.14%    ,
    the global benchmark, gained $1.11, or 1.3%, to trade at $84.66 a barrel on ICE Futures Europe.

    Much will ultimately depend on the U.S. response and whether Iran takes action aimed at shutting down the Strait of Hormuz, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch on Sunday afternoon.

    “We are on the cusp of this escalating, which could seriously impact the flow of crude oil,” he said.

    Three U.S. service members were killed and more than two dozen injured in a drone strike on a U.S. base in northeast Jordan, according to U.S. Central Command. They were the first U.S. fatalities in months of attacks on U.S. bases by Iran-backed militias since the start of the Israel-Hamas war in October.

    President Joe Biden attributed the Sunday attack to an Iran-backed militia group and said the U.S. “will hold all those responsible to account at a time and in a manner (of) our choosing.” News reports said U.S. officials were still working to conclusively identify the precise group responsible for the attack, but have assessed that one of several Iranian-backed groups is to blame.

    Some congressional Republicans called for direct retaliation on Iran.

    “We must respond to these repeated attacks by Iran & its proxies by striking directly against Iranian targets & its leadership. The Biden administration’s responses thus far have only invited more attacks. It is time to act swiftly and decisively for the whole world to see,” wrote Sen. Roger Wicker of Mississippi, the senior Republican on the Senate Armed Services Committee, in a post on X.

    Oil futures rallied last week to their highest since November, but with gains attributed in part to production outages in the U.S. and more upbeat expectations around economic growth.

    “Crude already has the wind to its back, so this will only offer further upside,” Chris Weston, head of research at Australian brokerage Pepperstone told MarketWatch in an email.

    With the U.S. election later this year, “Biden needs to strike a balance between increasing aggression that potentially puts U.S. serviceman lives in danger and could potentially raise the cost of living…while also showing a defiant stance that shows his resolve against terror,” Weston said.

    Oil prices have seen short-lived rallies around developments in the Middle East since the start of the Israel-Hamas war, but have failed to build in a lasting geopolitical risk premium. West Texas Intermediate crude
    CL00,
    +1.22%

    CL.1,
    +1.22%    ,
    the U.S. benchmark, remains around $15 below its 2023 peak in the mid-$90s set in late September. Brent crude
    BRN00,
    +1.15%    ,
    the global benchmark, pushed back above $80 a barrel last week.

    Attacks by Iran-backed Houthi militants on Red Sea shipping have forced a rerouting of tankers and cargo ships. For crude, that’s had implications for the physical market but hasn’t interrupted the flow of crude from the Middle East.

    A move by Iran aimed at closing off the Strait of Hormuz, the world’s biggest oil-transportation chokepoint, remains a top worry.

    The strait is a narrow waterway that links the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, the waterway is only 21 miles wide, and the width of the shipping lane in either direction is just two miles, separated by a two-mile buffer zone.


    Energy Information Administration

    Around 21 million barrels a day of crude moved through the waterway in the first half of 2023, equivalent to around a fifth of daily global consumption, according to the U.S. Energy Information Administration.

    The U.S. stock market has largely looked past Middle East tensions, with the S&P 500
    SPX
    returning to record territory this month, while the Dow Jones Industrial Average
    DJIA
    has also set a series of records.

    Dow futures
    YM00,
    -0.20%
    were off 94 points, or 0.3% as Asian trading got under way, while S&P 500 futures
    ES00,
    -0.22%
    fell 12 points, or 0.2%, and Nasdaq-100 futures
    NQ00,
    -0.24%
    lost 0.3%.

    Read: Stock-market rally faces Fed, tech earnings and jobs data in make-or-break week

    Away from oil, there were no signs of a significant surge in demand for instruments that traditionally serve as havens during periods of increased geopolitical tension. Futures on U.S. Treasurys
    TY00,
    +0.21%
    saw a modest rise of 0.2%, while the U.S. dollar
    DXY
    was little changed versus major rivals and gold futures
    GC00,
    +0.41%
    ticked up 0.4%.

    Escalating Middle East tensions won’t go unnoticed by traders, but probably doesn’t warrant a “solid derisking,” Weston said, particularly with investors facing a barrage of major market events in the week ahead.

    For U.S.-focused investors, the week ahead features a Federal Reserve policy meeting, earnings from tech industry heavyweights and a crucial December jobs report.

    The Middle East situation “won’t take us too far off the rates, growth track, but we have an eye on whether this escalates,” Weston said.

    —Associated Press contributed.





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  • Dow ends nearly 400 points higher as tech rally leads stocks to highest close since September

    Dow ends nearly 400 points higher as tech rally leads stocks to highest close since September

    U.S. stocks ended sharply higher Friday, more than shaking off weakness seen the previous session in the aftermath of a poor Treasury bond auction and fresh signs that interest rates may stay higher for longer.

    Technology stocks drove the bounce, with the Nasdaq Composite leading major indexes to the upside as it and the S&P 500 logged their highest finishes since September.

    What happened

    • The Dow Jones Industrial Average
      DJIA
      rose 391.16 points, or 1.2%, to close at 34,283.10.

    • The S&P 500
      SPX
      ended with a gain of 67.89 points, or 1.6%, at 4,415.24.

    • The Nasdaq Composite
      COMP
      advanced 276.66 points, or 2%, to finish at 13,798.10.

    The rally left the Dow with a weekly gain of 0.7%, while the S&P 500 advanced 1.3% and the Nasdaq booked a rise of 2.4%. The Dow saw its highest close since Sept. 20, while the S&P 500 ended at its highest since Sept. 19 and the Nasdaq at its highest since Sept. 14.

    Market drivers

    Tech was in the driver’s seat. Shares of Microsoft Corp.
    MSFT,
    +2.49%
    jumped 2.5%, with the Dow component scoring its third record close in four sessions. Intel Corp. shares
    INTC,
    +2.80%
    rose 2.8% to lead Dow gainers.

    Meanwhile, the S&P 500 tested important chart resistance at the 4,400 to 4,415 level, which marks the confluence of previous resistance and the 61.8% Fibonacci retracement of the July-October drop, according to Matthew Weller, global head of research at Forex.com, in a note (see chart below).


    Forex.com

    “From a bigger picture perspective, bulls will need to see the index conclusively break above 4415 before declaring that the post-July streak of lower lows and lower highs is over,” Weller wrote.

    The S&P 500 and Nasdaq Composite ended their longest winning streaks since November 2021 on Thursday, after a poorly-received $24 billion sale of 30-year Treasury bonds.

    A calmer bond market may have helped set the tone for stocks. The yield on the 30-year Treasury bond
    BX:TMUBMUSD30Y
    fell 3.2 basis points to 4.733%, after it nearly notched its biggest one-day jump since June 2022. The yield still saw a weekly decline, its third straight.

    It was unclear whether the Treasury auction had been affected by a reported ransomware attack against the U.S. unit of the Industrial & Commercial Bank of China that apparently disrupted the U.S. Treasury market.

    See: How ransomware attack on ICBC rattled the Treasury market and shook up a 30-year bond auction

    Thursday’s setback was also tied to comments from Federal Reserve Chairman Jerome Powell, who told an International Monetary Fund panel on Thursday that the central bank was wary of “head fakes” from inflation, and the “2% goal was not assured.”

    Much of Powell’s language was nearly identical to remarks he made on Nov. 1, when investors rallied stocks and bonds after the Fed chair didn’t explicitly commit to a further interest rate hike. But the subsequent rally for stocks after the Nov. 1 Fed meeting, with the S&P 500 jumping more than 6% over eight days, and a 50 basis point drop in the 10-year Treasury yield were “overdone and not governed by facts,” said Tom Essaye, founder of Sevens Report Research, in a note.

    “Meanwhile, if we think about what the Fed said last week, namely that the rise in the 10-year yield was doing the Fed’s work for it and as a result they may not have to hike rates, then the short/sharp decline in the 10-year yield we’ve seen could essentially remove the reason for the Fed not having to hike rates — and that could put a rate hike back on the table!” he wrote. “That’s essentially what Powell reminded us of yesterday and that, along with the poor Treasury auction, pushed yields higher,” setting up pressure on stocks.

    U.S. consumer sentiment fell in November for the fourth month in a row due to worries about higher interest rates as well as war in the Middle East. The preliminary reading of the sentiment survey declined to 60.4 from 63.8 in October, the University of Michigan said Friday. It’s the weakest reading since May.

    Investors were also tuning into more comments by Fed officials Friday, including San Francisco Fed President Mary Daly, who said she didn’t know if rates were high enough to bring inflation back down to the central bank’s 2% target.

    Companies in focus

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  • Oil falls, markets hold steady as Israel launches Gaza ground offensive

    Oil falls, markets hold steady as Israel launches Gaza ground offensive

    Oil futures dropped Sunday night as markets saw a calm opening following Israel’s launch of a ground offensive in Gaza that drew implied threats from Iran amid market fears of a wider conflict that could disrupt global crude supplies.

    Oil declined as Israel “seems to be approaching the situation with caution, which has brought a sense of relief that the worst-case scenarios may not materialize,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

    Innes, however, said investors should remember “this is likely to be a long, drawn-out affair with many false dawns.”

    West Texas Intermediate crude for December delivery
    CL00,
    -1.51%

    CL.1,
    -1.51%

    CLZ23,
    -1.51%
    fell 93 cents, or 1%, to $84.61 a barrel on the New York Mercantile Exchange on Sunday night. December Brent crude
    BRNZ23,
    -1.34%    ,
    the global benchmark, was off $1, or 1.1%, at $89.48 a barrel on ICE Futures Europe, dipping back below the $90-a-barrel threshold.

    Oil futures jumped nearly 3% on Friday, but suffered weekly declines, eroding the modest risk premium priced into the market.

    Read: 4 reasons why oil prices have only seen a modest Middle East risk premium

    Israeli solders had moved at least two miles deep into the Gaza Strip as of Sunday, the Wall Street Journal reported, after beginning a delayed ground incursion into the enclave aimed at routing Hamas following its Oct, 7 attack on southern Israel that left more than 1,400 dead and saw more than 200 Israelis taken hostage.

    A sustained bombardment of the densely populated Gaza Strip by Israel has resulted in more than 8,000 casualties, according to Palestinian authorities. Israel has been under pressure by the U.S. and others to minimize civilian casualties.

    U.S. stock-index futures ticked higher, with S&P 500 futures
    ES00,
    +0.32%
    up 0.3%, while futures on the Dow Jones Industrial Average
    YM00,
    +0.20%
    added 68 points, or 0.2%.

    The biggest worry among investors is a conflict that sees Iran become more directly involved. Iranian crude exports have rebounded from lows seen after the Trump administration withdrew the U.S. from a nuclear accord with Tehran and reimposed sanctions in 2018.

    A renewed crackdown on Iran could take up to 1 million barrels a day of crude off the market, while a spiraling conflict could see Tehran threaten transportation chokepoints, particularly the Strait of Hormuz, or otherwise attack infrastructure in the region, while driving up a fear premium.

    Iranian President Ibrahim Raisi, in a post on X written in English, said Saturday that Israel had “crossed the red lines, which may force everyone to take action.”

    U.S. warplanes on Friday struck two locations in eastern Syria, which the Pentagon said were linked to Iran’s Revolutionary Guard Corps, following a string of attacks on U.S. air bases in the region that started last week.

    U.S. stocks are poised to book another round of monthly losses as October draws to an end, though pressure has been attributed largely to a surge in Treasury yields. The S&P 500
    SPX
    last week joined the Nasdaq Composite
    COMP
    in correction territory, while the Dow
    DJIA
    is down more than 2% year to date.

    The rise in yields, which move opposite price, has come as U.S. government debt has failed to attract its usual haven-related buying amid rising Mideast tensions.

    See: Israel-Hamas war sees investors shun most traditional havens, except for these two

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  • What’s next for markets after aborted Wagner mutiny leaves Russia’s Putin weakened

    What’s next for markets after aborted Wagner mutiny leaves Russia’s Putin weakened

    Investors will start the week nervously sorting through the aftermath of a short-lived rebellion by the mercenary Wagner Group that’s seen leaving Russian President Vladimir Putin weakened.

    “As Monday’s global markets are set to begin trading, investors are laser-focused on whether the short-lived Russia insurrection was only the beginning of a much deeper thunderbolt set to rock geopolitical, economic and market stability in the days and weeks ahead,” Greg Bassuk, chief executive officer at AXS Investments in New York, told MarketWatch on Sunday in emailed comments.

    U.S. stock-index futures edged up after the start of electronic trading Sunday night, while oil rallied. Futures on the Dow Jones Industrial Average
    YM00,
    +0.14%
    rose 25 points, while S&P 500 futures
    ES00,
    +0.15%
    edged up 0.1% and Nasdaq-100 futures gained 0.2%.

    Global stocks fell last week as interest-rate hikes by European central banks stoked recession fears. In the U.S., the S&P 500
    SPX,
    -0.77%
    ended a streak of five straight weekly gains, while the Dow Jones Industrial Average
    DJIA,
    -0.65%
    and Nasdaq Composite
    COMP,
    -1.01%
    also pulled back.

    See: Russia’s short-lived revolt could have long-term consequences for Putin, as questions remain over Prigozhin’s whereabouts

    ‘Real cracks’

    While a weakened Russia raises the prospects of a favorable outcome for Ukraine 16 months after Putin’s decision to invade, the potential for further internal strife in the nation with the world’s largest nuclear arsenal is less comforting, observers noted.

    “This raises profound questions. It shows real cracks,” U.S. Secretary of State Antony Blinken told CBS News’ “Face the Nation” on Sunday morning.

    Putin’s hold on power “certainly seems shakier than it was a few days ago,” but there remains “no clear contender to replace him, by election or coup,” said Benjamin Friedman, policy director at Defense Priorities, a foreign-policy think tank in Washington, D.C.

    Nonetheless, the war in Ukraine “is weakening Russia in various ways, including by creating internal strife and dangerously discontented elites who have some power,” Friedman told MarketWatch. “The perception of Putin’s fallibility and weakness is growing and creates its own reality. That is dangerous to him. It’s hard to predict what additional power grabs and instability that could create,” he said.

     See: Russia’s short-lived revolt could have long-term consequences for Putin, as questions remain over Prigozhin’s whereabouts

    ‘Bloodbath’ of volatility?

    AXS Investment’s Bassuk said the further turmoil “could drive a bloodbath of market volatility amid its impact on the war with Ukraine, a shifting balance among the G-8 superpowers, and the already heightened potential for a U.S. and global recession.”

    Analysts have warned that an uptick in volatility may be overdue. The Cboe Volatility Index
    VIX,
    +4.11%    ,
    a measure of expected volatility in the S&P 500 over the next 30 days, last week fell to its lowest since January 2020 and ended Friday below 14. Its long-term average stands near 20. The subdued performance, which has accompanied a year-to-date rally of more than 13% for the S&P 500 index, is taken by some market watchers as a sign of complacency.

    Read: Why the ‘easy money’ has been made in the stock-market rally — and what comes next

    Potential ‘nonevent’

    But the quick termination of the rebellion could make it more of a “nonevent” for capital markets as trading resumes, said Marc Chandler, managing director at Bannockburn Global Forex.

    While conventional wisdom sees signs of Putin’s weakness, the Russian leader has often been underestimated, he said.

    “The war in Ukraine is likely unaffected, and Kyiv’s counteroffense thus far seems rather muted. The risk is that the war escalates if Kyiv resorts to medium- and long-range missiles to hit Russian assets in Crimea, and possibly in Russia proper,” Chandler said.

    The rebellion, led by Wagner Group chief Yevgeny Prigozhin, saw the mercenary paramilitary force take over Russia’s southern military headquarters in Rostov-on-Don amid little resistance before marching largely unchallenged toward Moscow. Putin, without mentioning him by name, accused Prigozhin of treason.

    The advance halted a little more than 120 miles from the capital before Prigozhin abruptly stood down in a deal that would see him sent to Belarus and charges against him of leading an armed rebellion dropped.

    As events unspooled Saturday, analysts warned that extended strife could spark a flight to quality when markets reopened into assets like U.S. Treasury bonds
    TMUBMUSD10Y,
    3.720%    ,
    the U.S. dollar
    DXY,
    -0.14%
    and other havens like the Japanese yen
    USDJPY,
    -0.21%    ,
    Swiss franc
    USDCHF,
    -0.06%
    and gold
    GC00,
    +0.32%    .

    The dollar was little changed versus major rivals in the early going Sunday evening, while gold for August delivery
    GCQ23,
    +0.32%
    edged up 0.2%.

    All eyes on oil

    Meanwhile, commodity and financial markets have seen big swings since Russia invaded Ukraine on Feb. 24, 2022.

    First and foremost, the invasion produced a global energy shock. Russia was the world’s third-largest crude producer behind the U.S. and Saudi Arabia, and a key supplier of natural gas to Western Europe.

    Crude-oil futures soared in the immediate aftermath of the invasion, with the global benchmark Brent crude
    BRN00,
    +0.91%
    topping out just shy of $140 a barrel in early March 2022 after closing at $94.05 on the eve of the invasion.

    Natural-gas prices had also soared, and fears of shortages led to a scramble by European governments to fill storage amid apocalyptic predictions about a harsh 2022-’23 winter.

    Energy prices subsequently fell back. Crude oil is trading well below levels seen ahead of the invasion. And despite waves of sanctions by European and U.S. governments and price caps aimed at limiting Moscow’s ability to fill its coffers, Russian crude supplies remain robust.

    Oil prices were on the rise Sunday night, with WTI up 87 cents, or 1.3%, to trade at $70.03 a barrel, while Brent gained 91 cents, or 1.2%, to $74.76 a barrel.

    August Brent crude
    BRNQ23,
    +0.95%
    settled Friday at $73.85 a barrel, falling 3.6% last week. West Texas Intermediate crude for August delivery
    CL00,
    +0.91%    ,
    the U.S. benchmark, dropped 3.9% last week to end Friday at $69.16 a barrel.

    Jorge Leon, senior vice president at Rystad Energy, noted that in the past 35 years, geopolitical shocks involving big oil producers have seen crude futures jump by an average of 8% in the five days after the start of the triggering event (see chart below).


    Rystad Energy

    A rise of that magnitude looks unlikely given how quickly the rebellion was quelled, he said.

    “Given that the short-lived event this weekend in Russia appears to have ended, we do not expect to see such a significant increase in oil prices next week. We do, however, believe that the geopolitical risk amid internal instability in Russia has increased,” Leon said in emailed comments.

    —Barbara Kollmeyer contributed.

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  • U.S. stock futures little changed after short-lived Wagner mutiny in Russia; oil futures rise

    U.S. stock futures little changed after short-lived Wagner mutiny in Russia; oil futures rise

    U.S. stock-index futures opened near unchanged and attempted to edge higher Sunday night, as investors reacted to chaotic weekend events that saw a short-lived rebellion that pitted the mercenary Wagner Group against the Russian military leadership. After advancing to within around two hours of Moscow, the mutiny was abruptly halted, with Wagner Group leader Yevgeny Prigozhin reportedly agreeing to depart for Belarus. Analysts said the events, while a potential plus for Ukraine 16 months after Russia’s invasion, appeared to weaken Russian President Vladimir Putin’s hold on the country, That raises concerns about the potential for further internal strife, a recipe for uncertainty that could feed volatility in financial markets. Futures on the Dow Jones Industrial Average
    YM00,
    +0.09%
    rose 20 points, while S&P 500
    ES00,
    +0.10%
    futures ticked up 2.75 points and Nasdaq-100 futures
    NQ00,
    +0.16%
    edged up 11.25 points shortly after the start of electronic trading. Moves for all three contracts amounted to less than 0.1%. Stocks fell last week, with the S&P 500
    SPX,
    -0.77%
    snappng a streak of five straight weekly gains. Oil futures rose, with West Texas Intermediate crude for August delivery
    CL.1,
    +1.26%

    CL00,
    +1.26%    ,
    the U.S. benchmark, up 48 cents, or 0.7%, at $69.64 a barrel on the New York Mercantile Exchange.

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  • What’s next for markets after aborted Wagner mutiny leaves Russia’s Putin weakened

    What’s next for markets after aborted Wagner mutiny leaves Russia’s Putin weakened

    Investors will start the week nervously sorting through the aftermath of a short-lived rebellion by the mercenary Wagner Group that’s seen leaving Russian President Vladimir Putin weakened.

    “As Monday’s global markets are set to begin trading, investors are laser-focused on whether the short-lived Russia insurrection was only the beginning of a much deeper thunderbolt set to rock geopolitical, economic and market stability in the days and weeks ahead,” Greg Bassuk, chief executive officer at AXS Investments in New York, told MarketWatch on Sunday in emailed comments.

    U.S. stock-index futures edged up after the start of electronic trading Sunday night, while oil rallied. Futures on the Dow Jones Industrial Average
    YM00,
    +0.14%
    rose 75 points, while S&P 500 futures
    ES00,
    +0.12%
    edged up 0.2% and Nasdaq-100 futures gained 0.3%.

    Global stocks fell last week as interest-rate hikes by European central banks stoked recession fears. In the U.S., the S&P 500
    SPX,
    -0.77%
    ended a streak of five straight weekly gains, while the Dow Jones Industrial Average
    DJIA,
    -0.65%
    and Nasdaq Composite
    COMP,
    -1.01%
    also pulled back.

    See: Russia’s short-lived revolt could have long-term consequences for Putin, as questions remain over Prigozhin’s whereabouts

    ‘Real cracks’

    While a weakened Russia raises the prospects of a favorable outcome for Ukraine 16 months after Putin’s decision to invade, the potential for further internal strife in the nation with the world’s largest nuclear arsenal is less comforting, observers noted.

    “This raises profound questions. It shows real cracks,” U.S. Secretary of State Antony Blinken told CBS News’ “Face the Nation” on Sunday morning.

    Putin’s hold on power “certainly seems shakier than it was a few days ago,” but there remains “no clear contender to replace him, by election or coup,” said Benjamin Friedman, policy director at Defense Priorities, a foreign-policy think tank in Washington, D.C.

    Nonetheless, the war in Ukraine “is weakening Russia in various ways, including by creating internal strife and dangerously discontented elites who have some power,” Friedman told MarketWatch. “The perception of Putin’s fallibility and weakness is growing and creates its own reality. That is dangerous to him. It’s hard to predict what additional power grabs and instability that could create,” he said.

     See: Russia’s short-lived revolt could have long-term consequences for Putin, as questions remain over Prigozhin’s whereabouts

    ‘Bloodbath’ of volatility?

    AXS Investments’ Bassuk said the further turmoil “could drive a bloodbath of market volatility amid its impact on the war with Ukraine, a shifting balance among the G-8 superpowers, and the already heightened potential for a U.S. and global recession.”

    Analysts have warned that an uptick in volatility may be overdue. The Cboe Volatility Index
    VIX,
    +4.11%    ,
    a measure of expected volatility in the S&P 500 over the next 30 days, last week fell to its lowest since January 2020 and ended Friday below 14. Its long-term average stands near 20. The subdued performance, which has accompanied a year-to-date rally of more than 13% for the S&P 500 index, is taken by some market watchers as a sign of complacency.

    Read: Why the ‘easy money’ has been made in the stock-market rally — and what comes next

    Potential ‘nonevent’

    But the quick termination of the rebellion could make it more of a “nonevent” for capital markets as trading resumes, said Marc Chandler, managing director at Bannockburn Global Forex.

    While conventional wisdom sees signs of Putin’s weakness, the Russian leader has often been underestimated, he said.

    “The war in Ukraine is likely unaffected, and Kyiv’s counteroffense thus far seems rather muted. The risk is that the war escalates if Kyiv resorts to medium- and long-range missiles to hit Russian assets in Crimea, and possibly in Russia proper,” Chandler said.

    The rebellion, led by Wagner Group chief Yevgeny Prigozhin, saw the mercenary paramilitary force take over Russia’s southern military headquarters in Rostov-on-Don amid little resistance before marching largely unchallenged toward Moscow. Putin, without mentioning him by name, accused Prigozhin of treason.

    The advance halted a little more than 120 miles from the capital before Prigozhin abruptly stood down in a deal that would see him sent to Belarus and charges against him of leading an armed rebellion dropped.

    As events unspooled Saturday, analysts warned that extended strife could spark a flight to quality when markets reopened into assets like U.S. Treasury bonds
    TMUBMUSD10Y,
    3.727%    ,
    the U.S. dollar
    DXY,
    -0.11%
    and other havens like the Japanese yen
    USDJPY,
    -0.19%    ,
    Swiss franc
    USDCHF,
    -0.03%
    and gold
    GC00,
    +0.18%    .

    The dollar was little changed versus major rivals in the early going Sunday evening, while gold for August delivery
    GCQ23,
    +0.18%
    edged up 0.2%.

    All eyes on oil

    Meanwhile, commodity and financial markets have seen big swings since Russia invaded Ukraine on Feb. 24, 2022.

    First and foremost, the invasion produced a global energy shock. Russia was the world’s third-largest crude producer behind the U.S. and Saudi Arabia, and a key supplier of natural gas to Western Europe.

    Crude-oil futures soared in the immediate aftermath of the invasion, with the global benchmark Brent crude
    BRN00,
    +0.73%
    topping out just shy of $140 a barrel in early March 2022 after closing at $94.05 on the eve of the invasion.

    Natural-gas prices had also soared, and fears of shortages led to a scramble by European governments to fill storage amid apocalyptic predictions about a harsh 2022-’23 winter.

    Energy prices subsequently fell back. Crude oil is trading well below levels seen ahead of the invasion. And despite waves of sanctions by European and U.S. governments and price caps aimed at limiting Moscow’s ability to fill its coffers, Russian crude supplies remain robust.

    Oil prices were on the rise Sunday night, with WTI up 87 cents, or 1.3%, to trade at $70.03 a barrel, while Brent gained 91 cents, or 1.2%, to $74.76 a barrel.

    August Brent crude
    BRNQ23,
    +0.80%
    settled Friday at $73.85 a barrel, falling 3.6% last week. West Texas Intermediate crude for August delivery
    CL00,
    +0.69%    ,
    the U.S. benchmark, dropped 3.9% last week to end Friday at $69.16 a barrel.

    Jorge Leon, senior vice president at Rystad Energy, noted that in the past 35 years, geopolitical shocks involving big oil producers have seen crude futures jump by an average of 8% in the five days after the start of the triggering event (see chart below).


    Rystad Energy

    A rise of that magnitude looks unlikely given how quickly the rebellion was quelled, he said.

    “Given that the short-lived event this weekend in Russia appears to have ended, we do not expect to see such a significant increase in oil prices next week. We do, however, believe that the geopolitical risk amid internal instability in Russia has increased,” Leon said in emailed comments.

    —Barbara Kollmeyer contributed.

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  • This Bud’s for investors. Buy the stock even if Bud Light sales never recover, says analyst.

    This Bud’s for investors. Buy the stock even if Bud Light sales never recover, says analyst.

    The summer haze settling over stocks doesn’t look ready to budge Thursday, with the S&P 500 index
    SPX,
    -0.52%
    in the throes of its longest losing streak since May.

    On the bright side, the index is looking at a 6% gain for the June quarter, whose end is just a few days away.

    In other corners of the market, the quarter has been less forgiving. Consumer staples, those things you can’t live without, have lost over 1%, perhaps reflecting the tougher economic times we are living in. Within that sector, though, is beer and one name that has indeed had a quartarius horriblis.

    Anheuser-Busch InBev’s
    ABI,
    +1.82%

    BUD,
    -0.05%
    U.S.-listed shares are down about 15%, as Bud Light sales have tumbled following consumer backlash to a social-media campaign featuring trans activist Dylan Mulvaney in April.

    But our call of the day from Deutsche Bank says it’s time to buy this unloved stock, even if those Bud Light sales never recover. A team of analysts led by Mitch Collett have upgraded Anheuser-Busch shares to buy from hold and lifted their price target to €60 euros from €59 euros (they didn’t offer an ADR price target).

    Recent underperformance of the stock “implies a permanent reduction in ABI’s U.S. business. Our proprietary survey data suggests these headwinds are likely to fade even if we do not expect the U.S. business ever to fully recover from its current challenges,” said Collett.

    The analysts pointed to recent Nielson data that showed ABI’s U.S. business currently down 12%, with Bud Light sales off 24% and the rest of its portfolio down 7%. But an analysis of distribution data shows ABI itself isn’t “losing shelf presence” as sales velocity is the primary driver of the decline, which bodes well if consumer sentiment improves, said Deutsche Bank.

    Those declines are about a 12% headwind to ABI’s annual net income, which is in line with European underperformance seen by the stock, added Collett and the team.

    Read: Bud Light dethroned as top-selling beer by Modelo, as boycott cuts into sales

    Deutsche Bank conducted its own survey that showed 24% of Bud Light consumers are no longer buying that brand, with 18% buying less, but 21% buying more and 37% buying the same amount. Those findings are largely consistent with Nielson;s, said the analysts.

    Deutsche Bank’s own survey also showed that 42% of Bud Light drinkers expect to be buying Bud Light again in three to six months, versus 29% who see that as unlikely. And 50% expect that battered beer’s reputation will recover in time, versus 30% who says it won’t. “We believe this bodes well for the brand, recapturing some of its lost share,” said Collett and the team.

    Analysts at RBC Capital also recently pushed back on the selloff for the stock, saying the hit to the shares and forecasts for the stock are “excessive,” as they don’t see Bud Light’s troubles hurting AB InBev outside the U.S.. They said AB InBev is a “nerve-racking buying opportunity.”

    Ahead of Thursday’s open, U.S.-listed Bud shares were up about 1.3%, tracking gains from its Belgian shares.

    The markets

    U.S. stock index futures
    ES00,
    -0.25%

    YM00,
    -0.27%

    NQ00,
    -0.31%
    are drifting lower, with bond yields
    TMUBMUSD02Y,
    4.730%

    TMUBMUSD10Y,
    3.743%
    on the rise and oil prices
    CL.1,
    -1.82%
    also weaker. The Norwegian krone
    USDNOK,
    -0.80%
    is up 1.5% against the dollar after the country’s central bank hiked interest rates 50 basis points. Switzerland also hiked rates, but the Swiss franc is steady
    USDCHF,
    +0.12%    .
    The British pound
    GBPUSD,

    is higher after the Bank of England also hiked interest rates by 50 basis points. The Turkish lira was falling slightly after the central bank, under new management, hiked interest rate to 15% from 8.5%, against forecasts for a hike to 20%.

    China markets were closed for a holiday, with losses elsewhere, such as Japan
    NIK,
    -0.92%
    and Australia
    XJO,
    -1.63%    .

    For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

    The buzz

    Federal Reserve Chair Jerome Powell’s second day of testimony on Capitol Hill kicks off at 10 a.m. Eastern. On Wednesday, he said higher interest rates should be expected , but didn’t offer any clues on timing. U.S. weekly jobless benefit claims and current account data are due at 8:30 a.,m. ET, with leading indicators also at 10 a.m., alongside a speech from Cleveland Fed President Loretta Mester. Richmond Fed President Tom Barkin will speak at 4:30 p.m.

    The Bank of England will announce an interest-rate decision at 7 a.m. ET and after worse-than-expected inflation data on Wednesday, a 50 basis-point hike hasn’t been ruled out.

    Darden Restaurants
    DRI,
    +0.36%
    will report ahead of the open, with Smith & Wesson
    SWBI,
    +0.52%
    due after the close.

    Tesla stock
    TSLA,
    -5.46%
    is down 2% in premarket trading on the heels of the EV maker’s worst loss in two months.

    Joining recent actions by other big stakeholders cashing in on big gains for Nvidia
    NVDA,
    -1.74%    ,
    a board member just sold $51 million in stock.

    Best of the web

    Amazon allegedly duped people into subscribing to Prime and made it nearly impossible to cancel. Here’s how the feds say they did it.

    The Biden administration is reportedly exploring whether it can mount a campaign against Chinese tech giants like Alibaba and Huawei.

    A giant drilling machine is moving Stockholm toward an emissions-free future

    Wife of missing Titanic exploring sub pilot Stockton Rush is reportedly a descendant of two first-class passengers who died on the ship.

    The tickers

    These were the top searched tickers on MarketWatch as of 6 a.m. :

    Ticker

    		 Security name
    TSLA,
    -5.46%         		Tesla
    MULN,
    +24.24%         		Mullen Automotive

    NVDA,
    -1.74%         		Nvidia
    AMC,
    -1.31%         		AMC Entertainment
    APE,
    -2.30%         		AMC Entertainment preferred holdings
    NIO,
    -2.99%         		Nio
    PLTR,
    -7.28%         		Palantir Technologies
    MANU,
    +1.11%         		Manchester United
    SPCE,
    -4.99%         		Virgin Galactic Holdings
    AAPL,
    -0.57%         		Apple

    Random reads

    Are Elon Musk and Mark Zuckerberg ready for a cage match?

    It’s summertime. Let your kids get bored.

    Tokyo streets now offer the chance to snuggle an alpaca

    Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

    Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.

    Source link

  • U.S. stock futures slip after three-day break

    U.S. stock futures slip after three-day break

    U.S. stock index futures slipped lower Tuesday after a three-day break, with Chinese equities wilting on disappointment over the monetary stimulus efforts in the world’s number-two economy.

    What’s happening

    • Dow Jones Industrial Average futures
      YM00,
      -0.31%
      fell 109 points, or 0.3%, to 34,495.

    • S&P 500 futures
      ES00,
      -0.26%
      dropped 11 points, or 0.2%, to 4,442.

    • Nasdaq 100 futures
      NQ00,
      -0.16%
      decreased 28 points, or 0.1%, to 15,239.

    On Friday, the Dow Jones Industrial Average
    DJIA,
    -0.32%
    fell 109 points, or 0.32%, to 34299, the S&P 500
    SPX,
    -0.37%
    declined 16 points, or 0.37%, to 4410, and the Nasdaq Composite
    COMP,
    -0.68%
    dropped 93 points, or 0.68%, to 13690.

    What’s driving markets

    Investors were in a cautious mood following the U.S. long weekend in honor of the Juneteenth federal holiday, but that’s after a strong run. The S&P 500 gained 2.6% last week, its fifth week in a row of gains, as the tech-heavy Nasdaq Composite took its winning run to eight weeks.

    Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, said both retail and institutional investor sentiment are at their highest levels in over two years.

    “We note that the consensus is right about 80% of the time, which means such shifts in sentiment and positioning can often be right as the collective intelligence of the market knows best,” he said. “However, given our fundamental view on growth, we find it hard to get on board with the current excitement and narrative supporting it. In other words, if second half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct.”

    One event that investors have to weigh is the resumption this fall of student loan payments, and what that may mean for consumers’ disposable income. Student loan payments have been paused since the start of the pandemic in March 2020.

    China cut its 1- and 5-year lending rates by 10 basis points, which investors viewed to be modest, particularly after a Friday state council meeting didn’t result in other concrete measures. According to Societe Generale, there were expectations the 5-year rate, the benchmark for mortgages, would be cut by 15 basis points.

    The Hang Seng
    HSI,
    -1.54%
    fell 1.5% in Hong Kong.

    Alibaba
    BABA,
    -0.11%    ,
    the Chinese internet giant, also was in the spotlight after announcing that its CEO and chairman will step down to focus on the cloud division, with Brooklyn Nets owner Joseph Tsai becoming chairman.

    Tuesday’s economic data include housing starts data, which showed a 21.7% rise in May after a revised 2.9% drop in April. Building permits also climbed 5.2% in May.

    A panel later Tuesday will include both New York Federal Reserve President John Williams and Fed Vice Chair for Supervision Michael Barr. On Wednesday Fed Chair Jerome Powell is due to deliver semi-annual congressional testimony.

    Companies in focus

    Source link

  • Suddenly booming U.S. stocks set for pause as futures inch higher

    Suddenly booming U.S. stocks set for pause as futures inch higher

    U.S. stock futures paused Friday after a two-day rally, as investors focused on debt-ceiling talks and an address from Federal Reserve Chair Jerome Powell.

    What’s happening

    • Dow Jones Industrial Average futures
      YM00,
      +0.10%
      rose 17 points, or 0.1%, to 33635.

    • S&P 500 futures
      ES00,
      +0.15%
      gained 4 points, or 0.1%, to 4216.

    • Nasdaq 100 futures
      NQ00,
      +0.18%
      increased 12 points, or 0.1%, to 13906.

    On Thursday, the Dow Jones Industrial Average
    DJIA,
    +0.34%
    rose 115 points, or 0.34%, to 33536, the S&P 500
    SPX,
    +0.94%
    increased 39 points, or 0.94%, to 4198, and the Nasdaq Composite
    COMP,
    +1.51%
    gained 188 points, or 1.51%, to 12689.

    What’s driving markets

    The benchmark S&P 500 closed at its highest levels since Aug. 25, as the Nasdaq 100 also finished with a boom.

    Investors who had been betting against stocks appear to be scrambling to buy them as the U.S. economy shows signs of continuing to grow, while mostly hopeful signs have emerged from negotiations to lift the debt ceiling.

    Fed Chair Jerome Powell is due to step up to the mic at 11 a.m. Eastern — in a conversation with former Fed Chair Ben Bernanke — following recent commentary from central bank officials including Dallas Fed President Lorie Logan who seem ready to at least consider raising interest rates next month.

    Friday also will see the expiration of key options contracts.

    One segment missing out has been U.S.-listed Chinese stocks, as the KraneShares CSI China Internet ETF
    KWEB,
    -4.18%
    ended 4% lower on Thursday and has dropped 11% this year. The Hang Seng
    HSI,
    -1.40%
    closed 1.4% lower on Friday.

    Source link

  • Jobs report shows strong 253,000 increase in April. U.S. labor market not cooling much

    Jobs report shows strong 253,000 increase in April. U.S. labor market not cooling much

    The numbers: The U.S. created a stronger-than-expected 253,000 new jobs in April and wages rose sharply, indicating there’s still lot of demand for labor even as the economy slows.

    The increase surpassed the 180,000 forecast of economists polled by The Wall Street Journal.

    The unemployment rate, what’s more, fell a tick to 3.4% from 3.5%,…

    Source link

  • Jobs report shows strong 253,000 increase in April. U.S. labor market not cooling much

    Jobs report shows strong 253,000 increase in April. U.S. labor market not cooling much

    The numbers: The U.S. created a stronger-than-expected 253,000 new jobs in April and wages rose sharply, indicating there’s still lot of demand for labor even as the economy slows.

    The increase surpassed the 180,000 forecast of economists polled by The Wall Street Journal.

    The unemployment rate, what’s more, fell a tick to 3.4% from 3.5%,…

    Source link

  • When do U.S. markets reopen after Easter?

    When do U.S. markets reopen after Easter?

    U.S. investors will hop right back to work on Easter Monday, after the confluence of Good Friday and “jobs day” required an abbreviated trading session for stock-index futures and Treasurys.

    Because Good Friday isn’t a federal holiday, the U.S. Labor Department released the March jobs report at its usual time of 8:30 a.m. Eastern. U.S. stock exchanges and most markets were closed Friday, but U.S. stock-index futures on the CME remained open until 9:15 a.m., giving investors a 45-minute window to trade the employment data….

    Source link

  • Dow futures flip higher after March jobs report in thin Good Friday trading

    Dow futures flip higher after March jobs report in thin Good Friday trading

    U.S. stock-index futures turned higher in a holiday-shortened session after a solid March jobs report, though investors won’t fully digest the data until next week with cash trading in equities closed due to the Good Friday holiday.

    Trading in stock-index futures closed at 9:15 a.m. Eastern. Stock-index futures resume trading at their regular time, 6 p.m., on Sunday, as U.S. markets return to normal trading hours Monday.

    What stock-index futures are doing

    With…

    Source link

  • Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling

    Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling

    The numbers: The U.S. added a robust 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring as the central bank struggles to tame inflation. The consensus economist forecast called for a nonfarm-payrolls expansion of 238,000.

    The solid increase in employment last month followed a revised 326,000 gain in February and a gain of 472,000 in January.

    While the increase in hiring was the smallest monthly rise in more than two years, the number of jobs created last month was much greater than is typical.

    The U.S. economy has shown recent signs of stress.

    The unemployment rate, meanwhile, slipped to 3.5% from 3.6% as more people searched for and found work. That’s another sign of labor-market vigor.

    There was some good news in the report for the Fed, though.

    Wage growth continued to moderate closer to level the Fed would prefer. Hourly wages increased a mild 0.3% last month, the government said Friday.

    The increase in pay over the past year also slowed again to a nearly two-year low of 4.2% from 4.6% in February.

    What’s more, the share of people working or looking for work rose a tick to 62.6%. That’s the highest labor-force participation rate since February 2020, the last month before the pandemic’s onset.

    When more people look for work, companies don’t have to compete as hard for workers via higher pay.

    Emerging evidence of slack in a muscular U.S. labor market could encourage the Fed to take a breather after a rapid series of interest-rate increases.

    Still, the U.S. has added a whopping 1 million–plus new jobs in the first three months of the year. The labor market is not cooling off as much as the Fed would like.

    “ The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s. ”

    Stock-index futures rallied after the report, though the stock market itself is officially closed due to the Good Friday holiday.

    See: Why Good Friday complicates how stock-market traders will digest March jobs report

    Key details: About one-third of the new jobs created last month — 72,000 — were at service-sector companies such as bars and restaurants whose employment still has not returned to prepandemic levels.

    Americans are going out to eat a lot and spending relatively more on services than on goods.

    Government employment increased by 47,000. Hiring also rose at professional businesses and in healthcare. Retailers cut 15,000 jobs.

    Employment fell slightly in manufacturing and construction, or goods-producing industries, which are under more pressure from rising interest rates.

    The strong labor market has benefited all groups, but especially Black Americans. The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s.

    Big picture: The ongoing tightness in the labor market could inflame inflation and even push the Fed to raise interest rates more than currently forecast to try to get prices under control.

    Higher borrowing costs reduce inflation by slowing the economy, but most Fed rate-hike cycles since World War II have been followed by recession.

    On the flip side, the U.S. economy is starting to show more signs of deterioration due to the series of rapid Fed interest-rate increases since last year.

    Manufacturers have cut production and are arguably already in recession and the much larger service side of the economy is under more stress lately.

    If these trends continue the economy — and inflation — are bound to slow.

    The U.S. is still growing for now, however, and the labor market remains an oasis of strength.

    Low unemployment and rising wages have allowed Americans to keep spending. And so far they’ve keep the economy out of a widely predicted recession.

    Looking ahead: “The U.S. labor market is losing some momentum, but remains far too vibrant for the Fed to pause [its rate-hike campaign] in May,” said senior economist Sal Guatieri at BMO Capital Markets

    “Although job growth is gradually slowing, it remains too strong for the Federal Reserve,” said Sal Guatieri of PNC Financial Services.

    See: Traders see little chance interest rates will end up where Fed thinks in 2023

    Market reaction:  Futures contracts on the Dow Jones Industrial Average
    YM00,
    +0.19%
    rose 64 points, or 0.2%, to 33,723. S&P 500 futures
    ES00,
    +0.24%
    gained 9.75 points, or 0.2%, to 4,141.75. Stock trading resumes again on Monday.

    The yield on the 10-year Treasury
    TMUBMUSD10Y,
    3.404%
    jumped to 3.36%.

    MarketWatch personal finance: U.S. economy added 236,000 jobs in March. Is this your last chance to jump ship?

    Source link

  • Dow futures flip higher after March jobs report in thin Good Friday trading

    Dow futures flip higher after March jobs report in thin Good Friday trading

    U.S. stock-index futures turned higher in a holiday-shortened session after a solid March jobs report, though investors won’t fully digest the data until next week with cash trading in equities closed due to the Good Friday holiday.

    Trading in stock-index futures closed at 9:15 a.m. Eastern. Stock-index futures resume trading at their regular time, 6 p.m., on Sunday, as U.S. markets return to normal trading hours Monday.

    What stock-index futures are doing
    • Futures on the Dow Jones Industrial Average
      YM00,
      +0.19%
      rose 64 points, or 0.2%, to 33,723.

    • S&P 500 futures
      ES00,
      +0.24%
      gained 9.75 points, or 0.2%, to 4,141.75.

    • Nasdaq-100 futures
      NQ00,
      +0.10%
      ticked up 13.50 points, or 0.1%, to 13,184.25.

    With the exception of the Dow industrials, U.S. stocks finished the holiday-shortened week lower on Thursday after three consecutive weekly gains for the S&P 500 and the tech-heavy Nasdaq. The Dow
    DJIA,
    +0.01%
    rose 0.6% for the week, while the S&P 500
    SPX,
    +0.36%
    shed 0.1% and the Nasdaq
    COMP,
    +0.76%
    slumped 1.1%, after scoring its best quarter since 2020.

    Market drivers

    The U.S. added 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring and possibly making it harder for the central bank to tame inflation. Economists polled by The Wall Street Journal had forecast 238,000 new jobs.

    The unemployment rate, meanwhile, slipped to 3.5% from 3.6%. Wages rose 0.3% last month.

    “This month’s report indicates that interest rate hikes have yet to impact tight unemployment conditions,” said Steve Rick, chief economist at CUNA Mutual Group, in emailed comments.

    Treasury yields popped higher and the dollar rose, though traders noted conditions were thin due to the holiday. Fed-funds futures showed traders pricing in a nearly 70% chance the Federal Reserve will lift interest rates by a quarter-point in May and a roughly 30% chance policy makers will leave rates unchanged. Traders had seen a roughly 50-50 split on Thursday.

    “Today’s jobs report is consistent with a slow-moving recession unfolding in the U.S. and one that does not point to immediate resolution of inflation concerns,” said Jason Pride, chief investment officer of private wealth at Glenmede, in a note. “As such, the odds of another quarter-point rate hike in May should go higher as the data does not appear to justify a Fed pause.”

    That said, policy makers and investors will see a raft of data before the next Fed meeting, including next week’s consumer-price index reading, Pride noted.

    See: Jobs report ‘likely tips the scales toward another rate hike in May’ — economists react to March release

    Good Friday is a market holiday but not a U.S. federal holiday. That means the U.S. Labor Department released its March jobs report, as usual. Bond traders will see a half day of trading, with Sifma recommending a noon ET close to allow a reaction to the data.

    Read: Why Good Friday complicates how stock-market traders will digest March jobs report

    Investors saw a stream of jobs-related data over the course of the past week. Data on Tuesday showed the number of U.S. job openings dropped below 10 million to a 21-month low, indicating a hot jobs market may be starting to lose some sizzle.

    ADP on Wednesday said the private sector added 145,000 jobs in March, well below the 210,000 expected by economists. Weekly jobless claims data on Thursday morning showed first-time applications for benefits last week came in higher than expected.

    Source link

  • Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling

    Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling

    The numbers: The U.S. added a robust 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring as the central bank struggles to tame inflation. The consensus economist forecast called for a nonfarm-payrolls expansion of 238,000.

    The solid increase in employment last month followed a revised 326,000 gain in February and a gain of 472,000 in January.

    While the increase in hiring was the smallest monthly rise in more than two years, the number of jobs created last month was much greater than is typical.

    The U.S. economy has shown recent signs of stress.

    The unemployment rate, meanwhile, slipped to 3.5% from 3.6% as more people searched for and found work. That’s another sign of labor-market vigor.

    There was some good news in the report for the Fed, though.

    Wage growth continued to moderate closer to level the Fed would prefer. Hourly wages increased a mild 0.3% last month, the government said Friday.

    The increase in pay over the past year also slowed again to a nearly two-year low of 4.2% from 4.6% in February.

    What’s more, the share of people working or looking for work rose a tick to 62.6%. That’s the highest labor-force participation rate since February 2020, the last month before the pandemic’s onset.

    When more people look for work, companies don’t have to compete as hard for workers via higher pay.

    Emerging evidence of slack in a muscular U.S. labor market could encourage the Fed to take a breather after a rapid series of interest-rate increases.

    Still, the U.S. has added a whopping 1 million–plus new jobs in the first three months of the year. The labor market is not cooling off as much as the Fed would like.

    “ The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s. ”

    Stock-index futures rallied after the report, though the stock market itself is officially closed due to the Good Friday holiday.

    See: Why Good Friday complicates how stock-market traders will digest March jobs report

    Key details: About one-third of the new jobs created last month — 72,000 — were at service-sector companies such as bars and restaurants whose employment still has not returned to prepandemic levels.

    Americans are going out to eat a lot and spending relatively more on services than on goods.

    Government employment increased by 47,000. Hiring also rose at professional businesses and in healthcare. Retailers cut 15,000 jobs.

    Employment fell slightly in manufacturing and construction, or goods-producing industries, which are under more pressure from rising interest rates.

    The strong labor market has benefited all groups, but especially Black Americans. The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s.

    Big picture: The ongoing tightness in the labor market could inflame inflation and even push the Fed to raise interest rates more than currently forecast to try to get prices under control.

    Higher borrowing costs reduce inflation by slowing the economy, but most Fed rate-hike cycles since World War II have been followed by recession.

    On the flip side, the U.S. economy is starting to show more signs of deterioration due to the series of rapid Fed interest-rate increases since last year.

    Manufacturers have cut production and are arguably already in recession and the much larger service side of the economy is under more stress lately.

    If these trends continue the economy — and inflation — are bound to slow.

    The U.S. is still growing for now, however, and the labor market remains an oasis of strength.

    Low unemployment and rising wages have allowed Americans to keep spending. And so far they’ve keep the economy out of a widely predicted recession.

    Looking ahead: “The U.S. labor market is losing some momentum, but remains far too vibrant for the Fed to pause [its rate-hike campaign] in May,” said senior economist Sal Guatieri at BMO Capital Markets

    “Although job growth is gradually slowing, it remains too strong for the Federal Reserve,” said Sal Guatieri of PNC Financial Services.

    See: Traders see little chance interest rates will end up where Fed thinks in 2023

    Market reaction:  Futures contracts on the Dow Jones Industrial Average
    YM00,
    +0.19%
    rose 64 points, or 0.2%, to 33,723. S&P 500 futures
    ES00,
    +0.24%
    gained 9.75 points, or 0.2%, to 4,141.75. Stock trading resumes again on Monday.

    The yield on the 10-year Treasury
    TMUBMUSD10Y,
    3.404%
    jumped to 3.36%.

    MarketWatch personal finance: U.S. economy added 236,000 jobs in March. Is this your last chance to jump ship?

    Source link

  • Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling

    Jobs report shows 236,000 gain in March — lifting 2023 total above 1 million — but U.S. labor market shows hints of cooling

    The numbers: The U.S. added a robust 236,000 new jobs in March, defying the Federal Reserve’s hopes for a big slowdown in hiring as the central bank struggles to tame inflation. The consensus economist forecast called for a nonfarm-payrolls expansion of 238,000.

    The solid increase in employment last month followed a revised 326,000 gain in February and a gain of 472,000 in January.

    While the increase in hiring was the smallest monthly rise in more than two years, the number of jobs created last month was much greater than is typical.

    The U.S. economy has shown recent signs of stress.

    The unemployment rate, meanwhile, slipped to 3.5% from 3.6% as more people searched for and found work. That’s another sign of labor-market vigor.

    There was some good news in the report for the Fed, though.

    Wage growth continued to moderate closer to level the Fed would prefer. Hourly wages increased a mild 0.3% last month, the government said Friday.

    The increase in pay over the past year also slowed again to a nearly two-year low of 4.2% from 4.6% in February.

    What’s more, the share of people working or looking for work rose a tick to 62.6%. That’s the highest labor-force participation rate since February 2020, the last month before the pandemic’s onset.

    When more people look for work, companies don’t have to compete as hard for workers via higher pay.

    Emerging evidence of slack in a muscular U.S. labor market could encourage the Fed to take a breather after a rapid series of interest-rate increases.

    Still, the U.S. has added a whopping 1 million–plus new jobs in the first three months of the year. The labor market is not cooling off as much as the Fed would like.

    “ The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s. ”

    Stock-index futures rallied after the report, though the stock market itself is officially closed due to the Good Friday holiday.

    See: Why Good Friday complicates how stock-market traders will digest March jobs report

    Key details: About one-third of the new jobs created last month — 72,000 — were at service-sector companies such as bars and restaurants whose employment still has not returned to prepandemic levels.

    Americans are going out to eat a lot and spending relatively more on services than on goods.

    Government employment increased by 47,000. Hiring also rose at professional businesses and in healthcare. Retailers cut 15,000 jobs.

    Employment fell slightly in manufacturing and construction, or goods-producing industries, which are under more pressure from rising interest rates.

    The strong labor market has benefited all groups, but especially Black Americans. The Black unemployment rate fell to 5% last month, the lowest level since records began being kept in the early 1970s.

    Big picture: The ongoing tightness in the labor market could inflame inflation and even push the Fed to raise interest rates more than currently forecast to try to get prices under control.

    Higher borrowing costs reduce inflation by slowing the economy, but most Fed rate-hike cycles since World War II have been followed by recession.

    On the flip side, the U.S. economy is starting to show more signs of deterioration due to the series of rapid Fed interest-rate increases since last year.

    Manufacturers have cut production and are arguably already in recession and the much larger service side of the economy is under more stress lately.

    If these trends continue the economy — and inflation — are bound to slow.

    The U.S. is still growing for now, however, and the labor market remains an oasis of strength.

    Low unemployment and rising wages have allowed Americans to keep spending. And so far they’ve keep the economy out of a widely predicted recession.

    Looking ahead: “The U.S. labor market is losing some momentum, but remains far too vibrant for the Fed to pause [its rate-hike campaign] in May,” said senior economist Sal Guatieri at BMO Capital Markets

    “Although job growth is gradually slowing, it remains too strong for the Federal Reserve,” said Sal Guatieri of PNC Financial Services.

    See: Traders see little chance interest rates will end up where Fed thinks in 2023

    Market reaction:  Futures contracts on the Dow Jones Industrial Average
    YM00,
    +0.19%
    rose 64 points, or 0.2%, to 33,723. S&P 500 futures
    ES00,
    +0.24%
    gained 9.75 points, or 0.2%, to 4,141.75. Stock trading resumes again on Monday.

    The yield on the 10-year Treasury
    TMUBMUSD10Y,
    3.404%
    jumped to 3.36%.

    MarketWatch personal finance: U.S. economy added 236,000 jobs in March. Is this your last chance to jump ship?

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  • Asian stocks tumble after Credit Suisse takeover

    Asian stocks tumble after Credit Suisse takeover

    BEIJING (AP) — Asian stock markets fell Monday after Swiss authorities arranged the takeover of troubled Credit Suisse amid fears of a global banking crisis ahead of a Federal Reserve meeting to decide on more possible interest rate hikes.

    Shanghai, Tokyo and Hong Kong declined. Oil prices retreated, and U.S. equity futures were tilting lower after initially rising on the takeover news.

    Swiss authorities on Sunday announced UBS would acquire its smaller rival as regulators try to ease fears about banks following the collapse of two U.S. lenders. Central banks announced coordinated efforts to stabilize lenders including a facility to borrow U.S. dollars if necessary.

    Investors worry banks are cracking under the strain of unexpectedly fast, large rate hikes over the past year to cool economic activity and inflation. That caused prices of bonds and other assets on their books to fall, fueling unease about the industry’s financial health.

    “Investors are waiting to see where the dust settles on the banking saga before making any bold moves,” Stephen Innes of SPI Asset Management said in a report.

    The Hang Seng
    HSI,
    -2.65%
    in Hong Kong lost 3% to 18,920 and the Nikkei 225
    NIK,
    -1.42%
    in Tokyo shed 1.2% to 26,990.25.

    The Shanghai Composite Index
    SHCOMP,
    -0.48%
    lost 0.2% to 3,241 after the Chinese central bank on Friday freed up additional money for lending by reducing the amount of money commercial are required to hold in reserve. Hong Kong shares of HSBC
    5,
    -6.23%
    dropped over 6%.

    The Kospi
    180721,
    -0.69%
    in Seoul retreated 0.6% to 2,382.03 and Sydney’s S&P-ASX 200
    XJO,
    -1.38%
    lost 1.4% to 6,900.00.

    India’s Sensex opened down 1.1% at 57,341.79. New Zealand and Southeast Asian markets also declined.

    The Swiss government said UBS will acquire Credit Suisse for almost $3.25 billion after a plan for the troubled lender to borrow as much as $54 billion from Switzerland’s central bank failed to reassure investors and customers.

    U.S. regulators have also sought to calm fears over threats to banking systems. The Federal Reserve said cash-short banks had borrowed about $300 billion from the Federal Reserve in the week up to Thursday.

    Separately, New York Community Bank
    NYCB,
    -4.66%
    agreed to buy a significant chunk of the failed Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. The FDIC said $60 billion in Signature Bank’s loans will remain in receivership and are expected to be sold off in time.

    Concerns persist about other lenders with shaky finances. Credit Suisse is among 30 institutions known as globally systemically important banks. Ahead of its takeover, Wall Street’s benchmark S&P 500 index
    SPX,
    -1.10%
    lost 1.1% on Friday to 3,916.64.

    Shares of First Republic Bank
    FRC,
    -32.80%
    sank nearly 33% to bring their plunge for the week to 71.8%.

    The Dow Jones Industrial Average
    DJIA,
    -1.19%
    lost 1.2% to 31,861.98. The Nasdaq Composite
    COMP,
    -0.74%
    fell 0.7% to 11,630.51. Dow futures
    YM00,
    -0.70%
    fell 0.3% early Monday, while S&P 500 futures
    ES00,
    -0.60%
    and Nasdaq-100 futures
    NQ00,
    -0.33%
    were steady.

    The unexpectedly large, fast rate hikes by the Fed and other central banks to cool inflation that is close to multi-decade highs have caused prices of bonds and other assets on their books to fall.

    Traders expect last week’s turmoil to push the Fed to limit a rate hike at its meeting this week to 0.25 percentage points. That would be the same as the previous increase and half the margin traders expected earlier.

    A survey released Friday by the University of Michigan showed inflation expectations among American consumers are falling. That matters to the Fed, which has said such expectations can feed into virtuous and vicious cycles.

    In energy markets, benchmark U.S. crude
    CL.1,
    -3.27%
    sank 93 cents to $64.81 in electronic trading on the New York Mercantile Exchange. The contract fell $1.61 on Friday to $66.74. Brent crude
    BRN00,
    -3.29%    ,
    the price basis for international oils, declined $1.05 cents to $71.92 per barrel in London. It retreated $1.73 the previous session to $72.97.

    The dollar
    DXY,
    +0.13%
    gained to 131.83 yen from Friday’s 131.67 yen. The euro
    EURUSD,
    -0.11%
    declined to $1.0676 from $1.0681.

    MarketWatch contributed to this report.

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  • U.S. stock-market futures edge higher after historic deal to rescue Credit Suisse

    U.S. stock-market futures edge higher after historic deal to rescue Credit Suisse

    U.S. stock-index futures opened with modest gains Sunday evening as investors assessed a historic deal to rescue troubled Swiss lender Credit Suisse, the latest maneuver by authorities attempting to prevent a deeper loss of confidence in the global banking system.

    Swiss bank UBS Group
    UBS,
    -5.50%
    agreed to buy rival Credit Suisse
    CS,
    -6.94%

    CSGN,
    -8.01%
    for more than $3 billion, a substantial discount to its Friday closing price, in a deal shepherded by Swiss regulators and closely watched by monetary and economic policy makers around the world.

    Don’t miss: Here’s why UBS’s deal to buy Credit Suisse matters to U.S. investors

    Also Sunday, the Federal Reserve and five other major central banks announced they were taking steps to ensure that U.S. dollars remained readily accessible throughout the global financial system.

    Futures on the Dow Jones Industrial Average
    YM00,
    +0.64%
    rose 123 points, or 0.4%, while futures on the S&P 500
    ES00,
    +0.65%
    and Nasdaq-100
    NQ00,
    +0.42%
    were also up 0.4%,

    Oil futures ticked higher after suffering their worst week of 2023 and ending Friday at their lowest since December 2021, with analysts tying the plunge largely to rising recession fears. April West Texas Intermediate crude
    CL.1,
    +0.55%

    CL00,
    +0.55%

    CLJ23,
    +0.55%
    rose 0.3% to $66.92 a barrel on the New York Mercantile Exchange, while May Brent crude
    BRN00,
    +0.52%    ,
    the global benchmark, ticked up 0.1% to $73.05 a barrel on ICE Futures Europe.

    The positive initial tone in markets late Sunday was reflected in a weaker tone for the Japanese yen, which has seen haven-related support this month on rising banking worries. The U.S. dollar was up 0.3% versus the Japanese currency
    USDJPY,
    +0.60%
    at 132.18 yen. The ICE U.S. Dollar Index
    DXY,
    +0.08%    ,
    a measure of the currency against a basket of six major rivals, was up 0.1%.

    Futures on U.S. Treasurys
    TY00,
    -0.82%    ,
    which also tend to serve as a haven during periods of crisis, were slightly lower. Treasurys rose sharply last week, dragging down yields, which move opposite to price, in volatile trading.

    Read: Why bond-market volatility is at its highest since the 2008 financial crisis amid rolling fallout from banks

    Credit Suisse’s 167-year run came to an end after a collapse in the value of its shares and bonds last week. Economists, investors and authorities worried that a collapse by Credit Suisse could amplify contagion fears in the global banking system after the demise earlier this month of California’s Silicon Valley Bank, or SVB.

    Economists expect U.S. banks to significantly tighten lending standards in response to the upheaval, raising the odds of the economy falling into recession.

    The Tell: ‘Hard landing’ in store for U.S. economy as bank crisis intensifies: economist

    As a result, fed-funds futures traders abandon expectations for a return to a supersized 50-basis-point, or half-percentage-point, rise in the Fed’s benchmark interest rate when policy makers complete a two-day meeting on Wednesday. The market at the end of last week showed traders saw a nearly 75% chance of a 25-basis-point hike, and a roughly 25% chance the Fed would hold rates unchanged.

    Traders also priced in the potential for significant rate cuts by the end of the year, signaling rising recession expectations. Those shifting expectations helped drive the Treasury rally, particularly for the policy-sensitive 2-year note
    TMUBMUSD02Y,
    4.003%    .

    Analysts said the Fed may be reluctant to hold off on a rate hike this week given still-elevated inflation readings and data so far that that shows the job market remains tight. Some economists see the Fed echoing the European Central Bank’s lead from last week, when it followed through with an earlier pledge to hike rates by 50 basis points while making clear that further rate moves would depend on future developments and data.

    Don’t miss: What’s at stake for stocks, bonds as Federal Reserve weighs bank chaos against inflation fight

    “While the Fed is obviously wary of contagion risks, it still views the banking sector as being well-capitalized, and it will want to stress that the inflation battle is not won, and it remains too high, so a 25-bps hike seems very likely, though like the ECB it will likely stress a high level of uncertainty, and offer no guidance, and emphasize data and financial conditions dependency,” said Marc Ostwald, London-based chief economist and global strategist at ADM Investor Services, in a note.

    Despite efforts by the Fed and other U.S. regulators to ringfence SVB and a pair of other collapsed banks while moving to backstop deposits, other regional banks have faced significant pressure. While all depositors at those banks were made whole, calls have increased for the U.S. to formally remove a $250,000 cap on insured deposits.

    Meanwhile, First Republic Bank
    FRC,
    -32.80%
    saw its credit rating downgraded further into junk territory by S&P Global Ratings, news reports said. The ratings firm cut the bank’s credit rating three notches to B-plus from BB-plus and warned further downgrades were possible, according to Reuters.

    First Republic has been a top concern for investors and regulators following the collapse of SVB. Last week a group of 11 large banks agreed to provide a combined $30 billion in deposits to First Republic in an effort to shore up confidence in the lender. Shares of First Republic have plunged more than 80% so far in March.

    U.S. stocks ended lower Friday amid banking sector fears, with the Dow
    DJIA,
    -1.19%
    booking back-to-back weekly losses.

    The S&P 500 
    SPX,
    -1.10%
    rose 1.4% last week, while the technology-heavy Nasdaq Composite 
    COMP,
    -0.74%
    climbed 4.4% in its biggest weekly percentage gain since January, according to Dow Jones Market Data.

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  • What a rescue for SVB depositors means for the stock market and interest rates

    What a rescue for SVB depositors means for the stock market and interest rates

    U.S. regulators came to the rescue of Silicon Valley Bank depositors late Sunday, triggering a modest relief rally in stock-index futures.

    But investors were left to weigh the outlook for Federal Reserve rate increases after the central bank’s aggressive tightening was flagged by economists and analysts for setting the stage for the second-largest bank failure in U.S. history.

    Federal regulators said depositors at Silicon Valley Bank, or SVB, would have access to all deposits on Monday morning. That includes uninsured deposits — those exceeding the FDIC’s $250,000 cap — in a move that analysts said would help avert runs similar to the event that capsized SVB from occurring elsewhere. SVB
    SIVB,
    -60.41%
    stock and bondholders, however, will be wiped out.

    Regulators said New York’s Signature Bank was also closed on Sunday and that its depositors would also be made whole.

    The Fed also announced a new emergency loan program that it said would help assure banks have the ability to meet the needs of all their depositors.

    “The American people and American businesses can have confidence that their bank deposits will be there when they need them,” President Joe Biden said in a statement Sunday night. “I am firmly committed to holding those responsible for this mess fully accountable and to continuing our efforts to strengthen oversight and regulation of larger banks so that we are not in this position again,” he said, adding that he will deliver additional comments Monday.

    A deal that spared depositors would be expected to let stocks “rally strongly,” said Barry Knapp, managing partner and director of research at Ironsides Macroeconomics, in a phone interview ahead of the announcement Sunday afternoon. Conversely, measures that would have forced depositors to take a hit would have had the potential to spark an ugly reaction, he said.

    Futures on the Dow Jones Industrial Average
    YM00,
    +1.24%
    rose 240 points, or 0.8% following the announcement, while S&P 500 futures
    ES00,
    +1.71%
    were up 1% and Nasdaq-100 futures
    NQ00,
    +1.72%
    gained 1.3%.

    Investors will also be assessing the fallout to see if it complicates the Federal Reserve’s plans to hike interest rates further and potentially faster than previously expected in its bid to tamp down inflation.

    SVB was closed by California regulators on Friday and taken over by the Federal Deposit Insurance Corp. Regulators raced over the weekend to come to a resolution for depositors after uncertainty around SVB triggered a sharp market selloff late last week.

    “In what is an already jittery market, the emotional response to a failed bank reawakens our collective muscle memory of the GFC,” Art Hogan, chief market strategist at B. Riley Financial Wealth, told MarketWatch in an email, referring to the 2007-2009 financial crisis. “When the dust settles, we will likely find that SVB is not a ‘systematic’ issue.”

    In a statement Sunday, Securities and Exchange Commission Chair Gary Gensler warned that regulators are on the lookout for misconduct: “In times of increased volatility and uncertainty, we at the SEC are particularly focused on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly. Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws.”

    Weekend Snapshot: What’s next for stocks after Silicon Valley Bank collapse as investors await crucial inflation reading

    Knapp said a deal that leaves depositors whole would lift the overall market and allow bank stocks, which got hammered last week, to “rip” higher “because they are cheap” and the banking system “as a whole…is in really good shape.”

    Banking stocks dropped sharply Thursday, led by shares of regional institutions, and extended their losses Friday. The selloff in bank stocks pulled down the broader market, leaving the S&P 500
    SPX,
    -1.45%
    down 4.6%, nearly wiping out the large-cap benchmark’s early 2023 gains. The Dow
    DJIA,
    -1.07%
    saw a 4.6% weekly fall, while the Nasdaq Composite
    COMP,
    -1.76%
    declined 4.7%.

    Investors sold stocks but piled into safe-haven U.S. Treasurys, prompting a sharp retreat in yields, which move opposite to prices.

    SVB’s failure is being blamed on a mismatch between assets and liabilities. The bank catered to tech startups and venture-capital firms. Deposits grew rapidly and were placed in long-dated bonds, particularly government-backed mortgage securities. As the Federal Reserve began aggressively raising interest rates roughly a year ago, funding sources for tech startups dried up, putting pressure on deposits. At the same time, Fed rate hikes triggered a historic bond-market selloff, putting a big dent in the value of SVB’s securities holdings.

    SVB was forced to sell a large chunk of those holdings at a loss to meet withdrawals, leading it to plan a dilutive share offering that stoked a further run on deposits and ultimately led to its collapse.

    See: Silicon Valley Bank is a reminder that ‘things tend to break’ when Fed hikes rates

    Meanwhile, the Fed’s newly announced Bank Term Lending Program will make loans of up to 12 months to banks and other depository institutions. In a crucial twist, it will allow the assets used as collateral for those loans to be valued at par, or face value, rather than marked to market. The Fed will also accept collateral at its discount window on the same conditions.

    “These are strong moves,” said Paul Ashworth, chief North America economist at Capital Economics, in a note.

    By accepting collateral at par rather than marking to market means that banks that have accumulated more than $600 billion in unreazlied losses on held-to-maturity Treasury and mortgage-backed securities portfolios and had failed to hedge interest-rate risk should be able to survive, he said.

    “Rationally, this should be enough to stop any contagion from spreading and taking down more banks, which can happen in the blink of an eye in the digital age,” Ashworth wrote. “But contagion has always been more about irrational fear, so we would stress that there is no guarantee this will work.”

    Analysts and economists had largely dismissed the notion that SVB’s woes marked a systemic problem in the banking system. Instead, SVB appeared to be a “a rather special case of poor balance-sheet management, holding massive amounts of long-duration bonds funded by short-term liabilities,” said Erik F. Nielsen, group chief economics adviser at UniCredit Bank, in a Sunday note.

    Mismanagement aside, the Fed’s rate hikes created an environment that set the stage for problems, analysts said. A deeply inverted yield curve, in which short-dated Treasury yields run sharply above longer-dated Treasurys, amplifies liability and asset mismatches.

    The yield on the 2-year note early last week traded more than 100 basis points, or a full percentage point, above the 10-year for the first time since the early 1980s.

    “Inverting the yield curve as deeply as they did…there’s going to be more accidents if they continue down that path,” Knapp said. “Push that thing to 150 basis points and see what happens. You’re going to have more blowups.”

    Fed-funds futures traders last week moved to price in a more-than-70% chance of an outsize 50-basis-point, or half a percentage point, rise in the benchmark interest rate at the Fed’s March meeting after Chair Jerome Powell told lawmakers that rates would need to move higher than previously anticipated. Expectations swung back to a 25-basis-point, or quarter-point move, as the SVB collapse unfolded, with traders also scaling back expectations for when rates will likely peak.

    Meanwhile, a flight to safety saw the yield on the 2-year Treasury note, which had earlier in the week topped 5% for the first time since 2007, end the week down 27.3 basis points at 4.586%.

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