* Dow, S&P 500 end modestly green, Nasdaq just above flat line
* Materials lead S&P sector gainers; energy weakest group
* Dollar, gold, bitcoin gain; crude falls
* 10-year Treasury yield trading at ~1.32%
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STOCKS IGNORE FED'S MUDDLED MESSAGE, RISE ON LOWER YIELDS (1605 EDT/2005 GMT)
Minutes released on Wednesday from the FOMC meeting in June left investors a bit muddled, but the message from a further drop in Treasury yields helped lift the S&P 500 and Nasdaq to new highs.
Though the Nasdaq barely eked out a gain, big tech has responded to a decline in market interest rates over the past week. Apple , Microsoft Corp , and other tech-titans such as Amazon.com Inc and Oracle Corp
, climbed to new peaks and led the S&P's advance.
The yield on the 10-year U.S. Treasury note slid below 1.3%, to levels last seen in February and a far cry from a jump to 1.776% at the end of March.
The minutes reflected a divided Fed wrestling with new inflation risks but still relatively high unemployment. Various policymakers felt conditions for reducing the Fed's asset buying would be "met somewhat earlier than they had anticipated."
But the minutes showed others cautioning that the reopening of the economy after a pandemic left an unusual level of uncertainty, which required a "patient" approach to any policy change.
"They've yet figured out what it is they'd like to do," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York. "The committee's debate on taper was non-committal, as the post-meeting policy statement made clear."
Both growth and value stocks gained, with the former slightly outpacing the latter.
Here is Wednesday's closing snapshot:
(Herbert Lash)
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TD RECOMMENDS SHORTING SOFR, SEES T-BILL ISSUANCE INCREASING AFTER DEBT CEILING RAISED (1500 EDT/1900 GMT)
TD Securities is recommending investors take a short position in SOFR futures maturing in November, on the view that Congress will likely raise the debt ceiling before it runs out of cash in October, which would lead to an increase in Treasury bill issuance.
The debt ceiling is due to be reinstated on July 31, after last being suspended for the past two years, but the U.S. Treasury is not expected to run out of borrowing capacity until early October, TD said.
The Treasury has been reducing its sales of short-dated debt as it reduces its cash balance heading into the debt ceiling deadline. This has kept yields on Treasury bills extremely low as short-term investors struggle to find assets to buy. The Treasury’s cash balance is expected to fall to $450 billion by the end of July, TD said.
Once the debt ceiling is raised or suspended, however, the Treasury is likely to raise its cash balance back to more “normal” levels of around $600 to $700 billion by quickly issuing $200 to $300 billion in Treasury bills, TD added. This could push bill yields higher in October and lead to slightly higher rates in overnight repurchase agreements, the bank said.
To benefit from this move the bank recommends taking a short position in November SOFR futures at 5 basis points, where it traded on Wednesday, with a target of 8 basis points.
SOFR is the benchmark U.S. rate selected to replace the London interbank offered rate (Libor), and is based on the overnight repo market.
(Karen Brettell)
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BITCOIN PASSES REGULATORY "STRESS TEST" (1345 EDT/1745 GMT)
China's crackdown on the country's cryptocurrency industry has been one of the biggest headaches for bitcoin investors over the past few months.
China's bitcoin mining industry, which accounts for as much as 70% of global capacity, may see up to 90% of its miners go offline, according to some estimates.
However, Marcel Kasumovich, head of research at One River Asset Management, says the bitcoin network's resilience has been demonstrated over the past few months, calling China's actions a "stress test" of bitcoin as an industrial asset.
"There is a massive migration of 'industrial production' of bitcoin away from a dominant player (China), yet, the bitcoin network had no downtime," Kasumovich told the Reuters Global Markets Forum
Meanwhile, China-based bitcoin miners are trying to exit the country, looking abroad for the trifecta of friendly regulatory authorities, cool temperatures and cheap power.
While crypto's power usage - equivalent to the energy consumption of some small countries - and subsequent carbon footprint is another one of many concerns, OneRiver's Kasumovich thinks that bitcoin miners will find it easy to migrate to "stranded" renewable energy production.
"In turn, bitcoin miners are adding to the economic return of renewable energy production, accelerating investment in the space," he added.
In the meantime, OneRiver, which offers multiple bitcoin funds, has a carbon-neutral share class for ESG-minded investors. For every Bitcoin owned, OneRiver purchases and "plants" tokenized carbon offsets in the Amazon.
That being said, Kasumovich noted that such offsets are merely a short term solution to bitcoin's energy footprint.
Meanwhile, bitcoin has steadied over the last week but is still trading over 47% below April's all time high.
(Lisa Mattackal)
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RECOVERY MAY BE ON SOLID FOOTING, BUT FED MINUTES A FOCUS (1210 EDT/1610 GMT)
HIS Markit is revising its 2021 U.S. GDP forecast down to 6.6%. That said, Joel Prakken, HIS Markit chief US economist and co-head US economics, believes "the recovery remains on solid footing."
HIS Markit believes strong final demand combined with lean inventories, a rising proportion of vaccinated Americans, coupled with the reversal of pandemic containment measures, against the backdrop of expansionary monetary and fiscal policy, support their forecast for 6.6% GDP growth this year and 5.0% next year.
“Near-term price pressures will push consumer price inflation to 3.7% this year and 2.4% in 2022. We expect these pressures to subside as supply expands in response to the recent surge in demand. However, in recognition of the upward revision to near-term inflation, we have moved forward our expected timing of the Fed’s interest rate “lift-off” from mid-2024 to September 2023,” said Prakken.
Meanwhile, LPL Financial Research expects today's release of minutes from the FOMC meeting in June to get more attention than usual as markets look for more hints on the Fed’s assessment of the economy and any future plans to taper asset purchases.
LPL says that good news has been bad news for rates as building expectations for asset purchase reductions have contributed to increased interest in Treasuries, pushing rates lower.
The U.S. 10-Year Treasury yield , now around 1.31%, is on pace to fall for a seventh straight day. That would be its longest losing streak since a nine-day decline in mid-February to early March 2020.
In any event, LPL says, "We do not think the early stages of this recovery are nearly as fragile as the last expansion and that the combination of inflation, economic growth, and expected increased Treasury issuance later in the year will contribute to pushing the 10-year Treasury yield higher despite the recent declines."
As for stocks, LPL says "We’d recommend using any weakness as an opportunity to add to positions."
(Terence Gabriel)
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ENGLAND FOOTBALL FEVER FAILS TO SPUR ECONOMIC BOOM (1142 EDT/1542 GMT)
England fans' excitement might be reaching fever pitch with Football getting (possibly) another step closer to coming home if the Three Lions beat Denmark tonight at Wembley. However, it doesn't look like all that enthusiasm will translate into much of an economic uplift for the country, finds Deutsche Bank.
So, what's the economic impact of Euro 2020 on the UK economy? Deutsche Bank's Sanjay Raja calculates fans will have spent nearly 40 million pounds ($55 million) on accommodation, 9 million pounds on food and eating out and another 3.5 million pounds on local tourism delights in either London or Glasgow, where many of the Euro 2020 games are played.
Direct spending assumptions are rather rigid though, and once you apply a suitable multiplier, Raja predicts a total uplift of 90 million pounds - or 0.05% of monthly GDP.
This does look a touch paltry, compared to the 1.2 billion euro ($1.4 billion) the Euro 2016 injected into France or the 1.34 billion euro of income generated in 2008 when Austria and Switzerland co-hosted. Yet, these are pandemic times with social and travel constraints, and having the tournament spread across 11 European cities dilutes the uplift further.
Scouring for market impact, Deutsche points out the currency has struggled to match the performance of its namesake on the pitch, Raheem Sterling.
Sterling is down in trade weighted terms, though that's not uncommon when looking at the currency between the start of the last thirteen major tournaments that England have qualified for, and the day after they bowed out.
"While currency returns have generally been more positive during World Cups than European Championships, there is sadly no correlation between on pitch performance and returns in currency markets, in line with the modest expected economic impact outlined above," writes Raja.
(Karin Strohecker)
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APPLY WITHIN - PLEASE? JOB OPENINGS SCALE NEW HEIGHTS (1115 EDT/1515 GMT) A fresh glimpse at the magnitude of the worker drought was thoughtfully provided by the Labor Department on Thursday.
The Job Openings and Labor Turnover Survey (JOLTS)
, a measure of employment churn, showed open positions inching to a record high of 9.209 million, up from April's downwardly revised 9.193 million.
The number, however, came in below consensus.
Demand has rushed back with a vengeance as inoculated consumers, wallets fattened by stimulus and savings, economically re-engage. But businesses are struggling to meet the rush as many workers remain on the sidelines.
As a result, Main Street is lousy with "help wanted" signs.
The report showed churn slowed down across the board, with hires, layoffs and quits all edging lower.
Notably, the quit rate, seen by many economists as a barometer of consumer expectations - workers are less likely to walk away from a gig in times of economic uncertainty - shed 0.3 percentage points to 2.5% of the labor force, possibly due in part to lingering concerns about long-term inflation.
As shown in the graphic below, the gap between job openings and hires is the widest it's ever been:
Meanwhile, the housing market - the economy's erstwhile spotlight hog - continues to show signs of cooling down as home prices, launched to the stratosphere by low supply and spiking materials prices, are pushing home affordability beyond the grasp of many potential buyers.
Demand for home loans slipped 1.8% last week despite dropping interest rates.
The Mortgage Bankers Association's (MBA) weekly report shows that while the average 30-year fixed contract rate edged lower, applications for loans to buy homes and refinance existing mortgages fell by 1% and 2%, respectively.
"Even as mortgage rates declined, with the 30-year fixed rate dropping 5 basis points to 3.15%, both purchase and refinance applications decreased," says Joel Kan, associate vice president of Economic and Industry Forecasting at MBA. "Swift home-price growth across much of the country, driven by insufficient housing supply, is weighing on the purchase market and is pushing average loan amounts higher."
All three U.S. stock indexes were modestly red amid a Treasury rally and in advance of the Fed minutes.
Chips and smallcaps were suffering the worst of it.
(Stephen Culp)
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TREASURY YIELDS REFLECT EXPECTATIONS OF WEAKER GROWTH, LESS FED SUPPORT (1045 EDT/1445 GMT)
The dramatic drop in benchmark U.S. Treasury yields to almost five-month lows on Wednesday likely reflects investors’ expectations of less fiscal and monetary support for the economy, and the possibility that economic momentum may be starting to wane, according to analysts.
Ten-year Treasury yields fell to 1.30% on Wednesday, the lowest since Feb. 19 and down from 1.47% on Friday.
The move on its surface would appear to counter expectations that the Fed could hint that it is closer to paring bond purchases when it releases minutes from its June meeting later on Wednesday.
However, “the path toward winding down QE by the end of 2022 has been reasonably well telegraphed by the Fed at this stage,” analysts at BMO Capital Markets said in a report on Wednesday.
The drop in yields “reflects investors looking past the next several quarters of performance of the real economy and toward an environment in which there is less fiscal and monetary policy support,” BMO said.
Tom Simons, a money market economist at Jefferies in New York, added that the bullish economic momentum from the reopening may already be starting to fade, especially in the labor market.
Data on Friday showed that nonfarm payrolls increased by 850,000 jobs last month, but the total is still 6.8 million below its peak in February 2020.
However, “it was expected to beat expectations by a lot, and it only barely beat expectations,” Simons said.
Data on Tuesday also showed that the ISM service sector employment index fell to 49.3 in June.
“There’s this expectation that maybe we’ve already seen the best part of the recovery and that the rest of this is going to be a slow grind as businesses try to figure out how to do more with less in terms of people, how to become more productive,” Simons said.
(Karen Brettell)
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WALL STREET GAINS, WITH BONDS FIRST STOP FOR EQUITIES (1017 EDT/1417 GMT)
For an idea of what's cooking in equity markets, check out bond yields first.
The yield on the 10-year U.S. Treasury note hit a fresh four-month low on Wednesday, sliding to 1.3%, and S&P 500 is tilting slightly higher. Big tech is leading the advance. This ahead of the release of Fed Minutes late today.
The Nasdaq set a new high at the open and the S&P 500 soon after. A 1.5% gain in Apple Inc is leading the S&P higher, followed by Amazon.com Inc , Microsoft Corp.
and Paypal Holdings .
Nvidia Corp and Tesla Inc are the biggest weights on the market.
Growth stocks are outpacing value, with the Russell 1000 Growth index up 0.4%, while the Russell 1000 Value index
is down 0.1%.
(Herbert Lash)
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WISE IPO: HERE'S LONDON'S TECH TRACK RECORD (0925 EDT/1325 GMT)
Fintech Wise just became London's largest ever tech listing by market capitalisation with a new price tag set today at 800 pence per share, valuing the company at 7.95 billion pounds ($11 billion).
Now, Boris Johnson's government has made no secret of its ambitions to boost the UK's capital credentials when it comes to tech and fintech in particular.
Several tech companies including Deliveroo , Trustpilot and Moonpig have already listed in London this year and helped push initial public offerings $(IPO.UK)$ to a record high.
The future will tell if post-Brexit Britain proves to be the
place to be for tech in Europe but in the meantime, here's the LSE's track record when it comes to tech IPOs:
See: Wise valued at $11 billion in record London direct listing
(Abhinav Ramnarayan and Julien Ponthus)
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SOME INTERESTING MARKET TURNS, THIS PAST MARCH (0900 EDT/1300 GMT)
In Shakespeare's play "Julius Caesar," a soothsayer issues a warning: "Beware of the Ides of March."
As it turns out, value investors should have heeded that warning this year, given that the S&P 500 Value index /S&P 500 Growth index ratio put in a high that month. On Tuesday, the value train suffered another derailment.
There was also another significant turn that developed in March. That is, small caps and micro caps peaked in relative strength vs the S&P 500:
In mid-March, on a weekly basis, amid an on-going speculative surge in so-called meme stocks, the iShares Russell 2000 ETF / SPDR S&P 500 ETF Trust ratio hit a 2-1/2 year high. However, the ratio failed right at a resistance line from early 2014, and has since fallen to an 8-month low.
Also in March, the iShares Microcap ETF /SPY ratio hit its highest level since early April, 2014. However, it was also repulsed by a resistance line. In this case, its line was from 2006.
Since failing at this barrier, the IWC/SPY ratio is on the back foot and is now flirting with its May trough, which was its lowest level since January.
Since topping in March, the IWM is down around 4%, while the IWC has lost around 7%. Against this, the SPY has advanced more than 16% from its early-March low.
So far, the market has weathered dissipating energy, and outright decline, in its more speculative segments well. This as an index that includes 10 of today's highly-traded tech titans, the NYSE FANG+TM index has surged around 20% from its March trough.
That said, amid fear of a black swan , renewed animal spirits across more speculative market segments and a resumption of broader participation in the form of a new high in the Nasdaq advance/decline line , may be needed to stave off any ill effects of the March turns.
(Terence Gabriel)
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FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)