Shares rally to records ahead of US jobs report, yields and dollar down

It was another straight shot up with the Dow gaining 130 and the S&P making another all-time record when the ECB, following in the Fed’s footsteps, announced a pause in their own rate hikes, signaling that inflation across the pond was getting under control faster than expected. Powell’s continued testimony further clarified that, if inflation continued on its current downward trend, there would almost certainly be rate cuts this year. Friday’s eagerly awaited jobs reported which is hoped to show wages leveling off with a “still resilient labor market” to provide further justification for rate cuts. But the ECB being on the same trajectory as the Fed bolstered optimism.  Volume came in at 11.45 billion, a little below the 4-week average. 

Shares rally to records ahead of US jobs report, yields and dollar down

By Alden Bentley and Marc Jones

Thu March 7, 2024 5:23 PM

DJ: 38,661.05  +75.86         NAS: 16,031.54  +91.95        S&P: 5,104.76  +26.11     3/6

DJ: 38,791.35  +130.30       NAS: 16,273.38  +241.83      S&P: 5,157.36  +52.60     3/7

NEW YORK/LONDON, March 7 (Reuters) - Global stock indexes rallied to record highs on Thursday, while government bond yields fell after the European Central Bank held interest rates steady and Federal Reserve Chair Jerome Powell reiterated that easing was likely in 2024 if inflation behaved.  The yield on benchmark 10-year U.S. Treasury notes hit a near one-month low then steadied as investors adjusted positions before Friday's release of the February U.S. payrolls report.  That is a highly anticipated monthly U.S. economic release because of its centrality to the Fed's high employment and low inflation mandates.  While the ECB left its policy rate at a record high, it took a first, small step towards lowering it, saying inflation was easing faster than it anticipated only a few months ago. 

"We are making good progress towards our inflation target and we are more confident as a result - but we are not sufficiently confident," ECB President Christine Lagarde told a press conference.  That sent the pan-European STOXX 600 (.STOXX), opens new tab to a record high. It closed up 0.99%, while Europe's broad FTSEurofirst 300 index (.FTEU3), opens new tab rose 20.37 points, or 1.03%

In the U.S., Powell on Wednesday testified before the House Financial Services Committee, saying rate reductions would "likely be appropriate" this year "if the economy evolves broadly as expected" and once officials gained more confidence in inflation's steady decline. He repeated those comments before the Senate Banking Committee on Thursday.  "The data comes out, the market reacts. Then it's always filtered through 'How does the Fed see this?' Obviously, there is a major focus on the rate cut time table so that tomorrow's release will be important," said Quincy Krosby chief global strategist LPL Financial, referring to the payrolls report.  Krosby said the market was not hoping for a blowout number. Rather it was focused on whether wages had leveled off while underpinning a "still resilient labor market."

The Dow Jones Industrial Average (.DJI), opens new tab rose 130.30 points, or 0.34%, to 38,791.35. The S&P 500 (.SPX), opens new tab gained 52.60 points, or 1.03%, to 5,157.36, a record high close.  The Nasdaq Composite (.IXIC), opens new tab hit an intraday record high and narrowly missed a closing record to end up 241.83 points, or 1.51%, at 16,273.38.  MSCI's gauge of stocks across the globe (.MIWD00000PUS), opens new tab went up 7.55 points, or 0.99%, closing at an all-time high.

"It's never been a bad thing to have synchronized global central bank policy. By that I mean the ECB is on a similar trajectory as the Federal Reserve is," said Art Hogan, chief market strategist at B Riley Wealth in New York.  Alignment of monetary policies should stabilize currencies, he said.  The dollar posted its biggest fall since late December against the yen, which rose on data showing Japanese workers' nominal pay surged in January, after the country's major employment union won big pay hikes in 2024 wage talks.  Bank of Japan board member Junko Nakagawa signaled her conviction that conditions for phasing out negative rates were now falling into place.  Against the Japanese yen , the dollar fell 0.88% to 148.05. The dollar index fell 0.52% to 102.80, with the euro up 0.47% at $1.0948.

"The bond market's up. Commodities are up. Investors are buying everything except the dollar. There's more optimism about the economy. There's more optimism about earnings and there's more optimism about policy," said John Augustine, chief investment officer at Huntington Private Bank, also citing the MSCI world share index's record high. 

Per the CBOE, volume came in at 11.45 billion, a little below the 4-week average.