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Wall Street stocks advanced on Monday, recovering some losses from the previous week, as investors looked ahead to a US inflation report to signal the next move from the Federal Reserve on interest rates.
Wall Street’s benchmark S&P 500 added 0.6 per cent and the tech-focused Nasdaq Composite gained 0.4 per cent at the New York opening bell, as both indices rebounded from a four-day losing streak.
Investors grew cautious last week as economic data signalled the US labour market had begun to slow under the weight of historically high borrowing costs, compounding bearish sentiment stoked by some weaker than expected corporate earnings.
The non-farm payrolls report released on Friday showed the US economy added 187,000 jobs in July, fewer than the 200,000 forecast by economists polled by Reuters. Wage growth, however, exceeded expectations.
The decline prompted some investors to take profits on Friday after a prolonged stock market rally took the S&P 500 17 per cent higher since the start of the year, with the Nasdaq gaining 34 per cent.
“The market’s grind higher continues,” said Ryan Belanger, founder of wealth management firm Claro Advisors. “But it’s important for investors to remain vigilant and not become complacent, as the market’s inflation and Federal Reserve fears remain intact.”
The slowing jobs market comes more than a year after the US central bank began its aggressive monetary tightening campaign, bringing the benchmark federal funds rate to its highest level in 22 years in an effort to tackle raging inflation.
While the overwhelming majority of the market expects the Fed to keep rates steady at its next meeting in September, policymakers signalled that their decision would depend on a string of economic data releases due before then.
“For now, investors are awaiting a sense of direction, and the data points will offer some clarity”, said Shanti Kelemen, chief investment officer at M&G Wealth.
Yields on the policy-sensitive two-year US Treasury were flat at 4.79 per cent on Monday, while yields on the benchmark 10-year note rose by 0.01 percentage points to 4.07 per cent. Bond yields gain as prices fall.
Investors have turned their attention to the US consumer price index coming out on Thursday. The data is expected to show that the country’s annual headline inflation rate accelerated to 3.3 per cent in July from 3 per cent the previous month.
Meanwhile, oil prices retreated after hitting their highest levels in almost four months on Monday, amid concerns over an escalation of fighting in the war in Ukraine and production cuts by Saudi Arabia.
Brent crude, the international benchmark, fell 0.5 per cent to $85.81 a barrel, having earlier reached its highest levels since mid-April, while US marker West Texas Intermediate fell 0.6 per cent to $82.32 a barrel.
The rouble fell against the dollar to trade at 97.07 on Monday, its lowest level since March 2022, shortly after the country invaded Ukraine.
The Russian currency has weakened since late June, hit by the attempted Wagner uprising and more recently by Ukraine’s drone strikes on Russian shipping.
European and Asian markets struggled for direction following an equity sell-off last week. The region-wide Stoxx Europe 600 was flat, while France’s Cac 40 added 0.1 per cent and Germany’s Dax declined 0.2 per cent. In Asia, the Chinese benchmark CSI 300 lost 0.8 per cent, while Hong Kong’s Hang Seng index was flat.