By Stephen Culp
NEW YORK (Reuters) -U.S. stocks moved higher on Monday, following their European counterparts, as markets looked ahead to key data and actions from central banks.
The S&P 500 appeared set to snap a four-session losing streak, bouncing back along with the Dow from its biggest weekly percentage loss since March 2022.
The tech-laden Nasdaq staged a comeback after suffering its largest Friday-to-Friday decline since January 2022 last week.
“Two things are happening,” said Greg Bassuk, Chief Executive Officer at AXS Investments in New York. “Investors are putting cash back to work after last week’s over-selling, and secondly, everyone is bullish on a Fed rate cut.”
“There’s a lot of dip-buying and Fed optimism today,” Bassuk added.
Last week a mixed bag of data, particularly the August employment report, caused investors to dial back expectations that the U.S. Federal Reserve could issue an outsized 50 basis point rate cut when it convenes for its policy meeting next week.
On Wednesday, the Labor Department’s Consumer Price Index is expected to show underlying inflation remains on its meandering path back down toward the central bank’s 2% goal.
At last glance, financial markets have baked in a 71% likelihood that the Fed will lower its key policy rate by 25 basis points at the conclusion of next week’s meeting, with a 29% probability of a 50 basis point reduction, according to CME’s FedWatch tool.
The Dow Jones Industrial Average rose 450.02 points, or 1.12%, to 40,795.43, the S&P 500 gained 51.77 points, or 0.96%, to 5,460.19 and the Nasdaq Composite added 120.65 points, or 0.72%, to 16,811.48.
European stocks staged a comeback with the benchmark STOXX 600 recovering from steep declines the previous week as investors look forward to an expected interest rate cut from the European Central Bank later in the week.
“Last week there was a lot of weak economic data in the U.S. and globally, and it had investors skittish over recessionary fears,” Bassuk said.
“With dip-buying and greater confidence that many central banks are going to be moving from hawkish to dovish policy there’s more optimism that the central banks can avoid a global recession,” he added.
The pan-European STOXX 600 index rose 0.82% and MSCI’s gauge of stocks across the globe gained 0.48%.
Emerging market stocks lost 1.04%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.1% lower, while Japan’s Nikkei lost 0.48%.
Here’s a look at world stock indexes as of Friday’s close:
U.S. Treasury yields waffled in choppy trading amid uncertainty over the size of the Fed’s expected interest rate cut this month.
Benchmark 10-year notes last rose 2/32 in price to yield 3.7042%, from 3.71% late on Friday.
The 30-year bond last rose 10/32 in price to yield 4.0023%, from 4.02% late on Friday.
The dollar regained strength against a basket of world currencies as investors looked ahead to key inflation data and pared expectations regarding the size of next week’s policy rate cut.
The dollar index rose 0.37%, with the euro down 0.34% to $1.1045.
The Japanese yen weakened 0.43% versus the greenback at 142.91 per dollar, while Sterling was last trading at $1.3083, down 0.30% on the day.
Crude rose as concerns over supply worries arising from a forecasts of a hurricane hitting Louisiana this week helped oil prices rebound from last week’s heavy losses.
U.S. crude rose 1.54% to settle at $68.71 per barrel, while Brent settled at $71.84 per barrel, up 1.10% on the day.
Gold prices pared earlier gains, and were last slightly higher as investors waited key inflation data.
Spot gold added 0.3% to $2,503.61 an ounce.
(Reporting by Stephen Culp; Additional reporting by Nell Mackenzie and Wayne Cole in London; Editing by Andrew Heavens and Nick Zieminski)