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# Tech Stocks Lead US Equities Higher as Traders Weigh Economic Outlook and Interest Rates

(Bloomberg) – Tech stocks are taking the lead in driving US equities higher in light trading, while Treasuries are falling as traders consider the possibility of a soft landing for the economy in light of higher interest rates.

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US stocks have experienced an advance in a choppy session, with trading in S&P 500 companies currently 19% below the 30-day average at this time of day. Monday’s rise was primarily driven by popular tech company Nvidia Corp. and other tech giants, after the sector experienced a two-week losing streak. However, smaller stocks are under pressure, and the Russell 2000 has reached its lowest point in over a month as risk-appetite wanes.

Treasury yields have ticked higher due to high-grade corporate bond sales on Monday which weighed on prices. The policy-sensitive two-year yield has extended its advance into the fourth day, reaching 4.93%, while the 10-year yield is currently at 4.16%.

Traders are speculating that interest rates will surpass inflation for an extended period, while investors who have recorded record first-half gains are facing warnings from central bankers that interest rates will not be cut in the near future.

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John Stoltzfus, the chief investment strategist at Oppenheimer & Co., is optimistic about the market, stating that the retracement of the broad market since July 31 is likely just a pause and not the end of the bull market. Stoltzfus believes that based on improving economic and corporate fundamentals, the US economy may be able to avoid a recession this cycle.

However, Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, has a more pessimistic view. She believes that the economy is already in a rolling recession and that the services sector will be the next to be impacted. Shalett argues that consumption, profit margins, and corporate pricing power have yet to be reset, and tighter policies will eventually pressure nominal gains.

Updates from China have unnerved the markets, particularly due to concerns surrounding Country Garden Holdings Co. and Zhongzhi Enterprise Group Co., a private-wealth manager. Country Garden, once the largest developer in China, has become the latest focal point of the country’s property issues.

According to Brad Bechtel, a Jefferies strategist, the lack of a comprehensive fiscal stimulus plan in China indicates that it is unlikely to happen. Bechtel believes that the “big bazooka” is not coming from China’s central bank.

Later this week, traders will focus on the minutes of the Federal Reserve’s latest policy meeting, hoping for clues regarding the central bank’s future moves. Investors who had bet on a shift towards easier policies this year are now having to adjust their bets, as officials indicate that interest rates will remain higher for a longer period.

In emerging markets, Argentina’s already-distressed debt has sagged even further after a populist candidate, who has vowed to burn down the central bank, received surprisingly strong support in a primary vote.

The offshore yuan has fallen to its weakest level since November, while the US dollar has strengthened. In commodities, both gold and crude have experienced a slump.

Corporate Highlights:

– Hawaiian Electric Industries Inc. has plunged by a record 36% due to concerns that its power lines may be linked to the deadly Maui wildfires.
– US Steel Corp. has surged 33% after rejecting a $7.25 billion takeover offer from Cleveland-Cliffs Inc. and announcing a strategic options review.
– Tesla Inc. has slipped 1.7%, which has triggered a selloff for other electric vehicle producers, after introducing a new round of price cuts in China.
– Nikola Corp. has plummeted after announcing a recall of trucks and temporarily stopping sales following several battery fires.

Key events this week:

– China: medium-term lending, retail sales, industrial production, fixed-asset investment, FX net settlement (Tuesday)
– Japan: industrial production, GDP (Tuesday)
– UK: jobless claims, unemployment (Tuesday)
– US: retail sales, empire manufacturing, business inventories, cross-border investment (Tuesday)
– Reserve Bank of Australia policy minutes (Tuesday)
– Federal Reserve Bank of Minneapolis President Neel Kashkari speaks (Tuesday)
– China: property prices (Wednesday)
– Eurozone: industrial production, GDP (Wednesday)
– UK: CPI (Wednesday)
– US: FOMC minutes, housing starts, industrial production (Wednesday)
– US: initial jobless claims, US Conf. Board leading index (Thursday)
– Eurozone: CPI (Friday)

Some of the main moves in markets:

Stocks:

– The S&P 500 rose 0.4% as of 1:13 p.m. New York time.
– The Nasdaq 100 rose 0.9%.
– The Dow Jones Industrial Average was little changed.
– The MSCI World index was little changed.
– The Russell 2000 Index fell 0.3%.

Currencies:

– The Bloomberg Dollar Spot Index rose 0.2%.
– The euro fell 0.2% to $1.0926.
– The British pound was little changed at $1.2695.
– The Japanese yen fell 0.2% to 145.29 per dollar.

Cryptocurrencies:

– Bitcoin rose 0.8% to $29,626.11.
– Ether was little changed at $1,852.06.

Bonds:

– The yield on 10-year Treasuries was little changed at 4.16%.
– Germany’s 10-year yield advanced one basis point to 2.64%.
– Britain’s 10-year yield advanced four basis points to 4.57%.

Commodities:

This story was produced with the assistance of Bloomberg Automation.

— With assistance from Cecile Gutscher.

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