Government bond yields fall after JOLTS report: markets align

(Bloomberg) — Treasury yields fell after job vacancies data beat expectations, dampening optimism with Jerome Powell’s comments that the latest data indicate the disinflation trend has resumed.

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Available positions rose to 8.14 million from a downwardly revised 7.92 million in the previous month, which was the lowest in three years, the Job Openings and Labor Turnover Survey, known as JOLTS, showed. Powell said before the data that a “substantial” step has been taken toward a better balance in the labor market between the supply and demand of workers. He continued to describe the labor market as strong, but said it is appropriately cooling.

“Powell’s comments were more relevant to the direction of yields this morning, as the chairman noted that ‘quite a bit of progress’ has been made on US inflation,” said Ian Lyngen of BMO Capital Markets. “In addition, risks are characterized as more balanced and no longer focused on the inflation side of the Fed’s dual mandate.”

The ten-year government bond yield fell by two basis points to 4.44%. The S&P 500 hovered around 5,470. Tesla Inc. recovered after deliveries exceeded expectations.

Bank of America Corp. customers exited US stocks for the second week in a row, with the outflows driven by hedge funds as institutional and retail investors were net buyers.

Clients sold $3.1 billion in U.S. stocks in the five-day period ending June 28, quantitative strategists led by Jill Carey Hall say.

The S&P 500 will soar to new highs by year’s end as economic strength outweighs market risks, according to RBC Capital Markets strategist Lori Calvasina.

She raised her year-end target from 5,300 to 5,700 – one of the highest on the Street. That implies a gain of about 4% compared to the most recent closing price. Still, Calvasina noted risks and called her target increase a “nervous increase.” The market is “a little ahead of itself” when it comes to valuations and certain sentiment metrics.

Deutsche Bank AG strategists expect US profits to rise by more than 13% in the second quarter, driven by the growth of mega-caps and technology stocks. The outlook is for a sixth consecutive quarter of above-average beats. However, the team led by Binky Chadha expects the market reaction to be muted as stocks have risen ahead of the season.

The story continues

The record rise in US stocks, driven mainly by US tech giants, is once again drawing comparisons to previous boom-and-bust cycles on Wall Street. But parallels to the dot-com era and stock market frenzy of the past have so far been exaggerated, if history is any guide.

While the S&P 500 has advanced 85% since 2019 despite some declines over the period, major bull runs from the 20th century dwarf are returning. According to data from Bloomberg Intelligence, the U.S. stock benchmark rose 220% during the last five years of the dot-com bubble at the turn of the century, and 238% during the same period of the Roaring Twenties.

Business highlights:

• Lennar Corp. and DR Horton Inc. were downgraded by Citigroup Inc. analyst Anthony Pettinari over concerns that the housing market could remain “sluggish” in the second half of the year.

• Novo Nordisk A/S and Eli Lilly & Co. went bankrupt after US President Joe Biden demanded price cuts on their blockbuster weight loss and diabetes drugs.

• Moderna Inc. has secured nearly $200 million from the U.S. government to accelerate the development of an mRNA vaccine against pandemic flu, as a dangerous strain of bird flu sweeps through the nation’s dairy farms, fueling concerns of a burgeoning health crisis.

• Northern Data AG is talking to potential advisers about a U.S. initial public offering of its combined artificial intelligence cloud computing and data center businesses, according to people familiar with the matter.

• BYD Co. is to partner with French car leasing company Ayvens SA to expand its presence in Europe, in a deal that gives the Chinese electric car maker greater access to the region’s lucrative business market.

Main events this week:

• China Caixin serves PMI, Wednesday

• Eurozone S&P Global Eurozone Services PMI, PPI, Wednesday

• US Fed Minutes, ADP Employment, ISM Services, Factory Orders, Initial Unemployment Claims, Durable Goods, Wednesday

• John Williams of the Fed will speak on Wednesday

• British general election, Thursday

• American Independence Day, Thursday

• Eurozone retail sales, Friday

• US jobs report, Friday

• John Williams of the Fed will speak on Friday

Some of the major moves in the markets:

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• The S&P 500 was little changed at 10:21 a.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average was little changed

• The Stoxx Europe 600 fell 0.6%

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.0730

• The British pound rose 0.2% to $1.2670

• The Japanese yen was little changed at 161.51 per dollar

Cryptocurrencies

• Bitcoin fell 1.6% to $62,252.81

• Ether fell 1.4% to $3,416.55

Bonds

• The yield on ten-year government bonds fell by two basis points to 4.44%

• The German ten-year yield fell by two basis points to 2.59%

• The British ten-year yield fell by five basis points to 4.23%

Raw materials

• West Texas Intermediate crude rose 0.2% to $83.58 a barrel

• Gold fell 0.3% to $2,325.69 an ounce

This story was produced with the help of Bloomberg Automation.

–With help from Robert Brand, Julien Ponthus, Alexandra Semenova and Aya Wagatsuma.

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