Future Trading Strategies
Fundamental Analysis

Equities Climb with Amazon and Energy Sector

  • The Fed’s hawkish long-term rate outlook pushed Treasury yields to 16-year highs.
  • The S&P 500 has fallen approximately 5.5% since late July.
  • European equities closed at their lowest point in over a month.

US equities gained ground on Monday as Amazon.com shares and the energy sector saw increases. Treasury yields continued to rise. Investors await economic data and Federal Reserve policymakers’ statements for clarity on interest rates later in the week.

US long-end Treasury Yields (Source: Bloomberg)

US long-end Treasury Yields (Source: Bloomberg)

Investors are contending with benchmark Treasury yields reaching 16-year highs. This rise came due to the Fed’s hawkish long-term rate outlook. 

Still, the S&P 500 rebounded on Monday, returning from its most significant weekly drop since March last week. As the third quarter’s end approaches, market movements might stay relatively subdued until companies report quarterly results in the upcoming weeks. While the S&P 500 has fallen approximately 5.5% since late July, it remains up by about 13% for 2023. 

Investors will monitor data throughout the week, including durable goods and August’s personal consumption expenditures price index. They will also watch the second-quarter Gross Domestic Product and remarks from Fed policymakers, including Chair Jerome Powell.

In an interview with CNBC on Monday, Chicago Fed President Austan Goolsbee expressed that inflation remaining above the Fed’s 2% target poses a greater risk than the central bank’s policy being excessively restrictive.

Meanwhile, Amazon.com shares climbed by 1.7% after the e-commerce giant announced its plan to invest up to $4 billion in startup Anthropic. The company aims to compete with emerging rivals in artificial intelligence within the cloud sector.

Elsewhere, European equities closed at their lowest point in over a month, as concerns about prolonged high interest rates and a slowing Chinese economy cast a shadow over the market. Moreover, investors evaluated multiple central bank decisions, with the Federal Reserve adopting a hawkish stance, the European Central Bank signaling a pause in October, and surprising dovishness from Britain, Switzerland, and Japan.

On Monday, ECB President Christine Lagarde stated that the central bank’s elevated deposit rate could reduce inflation to 2%.

Meanwhile, UK stocks experienced a decline, marking a slow beginning to the final week of the quarter. As the third quarter nears its conclusion with one week remaining, both FTSE indexes are on track for gains. Investors have found reassurance in indications of moderating inflation, which influenced the Bank of England’s decision to refrain from implementing an interest rate hike last week.