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U.S. stocks opened higher on Thursday, after a key inflation gauge held steady and yet more economic data on the labor market pointed to further cooling.
Minutes after the opening bell, the tech-heavy Nasdaq Composite (COMP.IND) and the benchmark S&P 500 (SP500) were up 0.2% each, while the blue-chip Dow (DJI) was +0.4%.
The latest Challenger report showed layoffs in August jumped back above 75K from nearly 24K in July. All the labor market data has been soft this week, helping risk assets on anticipation of a dovish Fed tilt. However, there was a mixed signal from the jobless claims report, which showed another fall. The big nonfarm payrolls report hits Friday.
Meanwhile, the Federal Reserve’s preferred inflation gauge – the personal consumption expenditures price index – held steady in July on a M/M basis. Core PCE came in at an expected +0.2% M/M.
“We doubt that an upside surprise in the July core PCE will materially boost the chances of another rate hike, not least because it would be driven largely by a spike in the hugely volatile financial services component,” Pantheon Macro said.
The S&P 500 (SP500) notched its fourth-straight gain in the previous session. It hasn’t been up five days in a row in more than two months.
For August, the S&P is down 1.6%, with the Nasdaq (COMP.IND) down 2.3% and the Dow (DJI) down 1.9%.
A “strong finish narrowed August’s stock loss to c.2%, with the dollar (DXY) stronger, oil (CL1:COM) flat, and bonds and bitcoin (BTC-USD) lower,” strategist Ben Laidler said. “This resilience is telling after August’s triple whammy of higher fixed income yields, oil prices, and China concerns, after a record-breaking first seven-month rally. Some of September’s weak seasonality fear may have been anticipated, and we remain positive markets.”
The 10-year Treasury yield (US10Y) fell 2 basis points to 4.09% and the the 2-year yield (US2Y) fell 2 basis points to 4.86%.
“US Treasury yields remain under downward pressure as 10Y yields are trying to get a foothold at around 4.1% – early last week they had hit a high at 4.35%,” ING said.
Expectations “of another rate hike from the Fed have continued to come down, and now stand beneath 50% for the first time since last week. So bad news on the economy is still being treated as good news (for now), since optimism about fewer rate hikes is outweighing the prospects of slower growth.”
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