Stock market news: Markets tick up as investors wait for Fed’s Powell to speak

Major averages were slightly higher Friday with big moves unlikely to come until Fed chief Jay Powell hits the stage late morning.

Early on and the Dow (DJI) was up by 0.2%, the S&P 500 (SP500) picked up 0.3%, and the Nasdaq Composite (COMP.IND) gained 0.1%.

Increasing hopes of a debt-ceiling deal have helped equities to what looks like a definite weekly gain. Going into Friday, the S&P 500 (SP500) is up 1.8%, the Nasdaq Composite (NDX:IND) is up 3.3% and the Dow (DJI) is the laggard, rising 0.7%.

“It was quite easy last week to suggest that the debt ceiling was having minimal negative impact on markets (outside of short-dated T-bills) but this week’s more positive sentiment on the topic has moved bond markets a lot and sent the S&P 500 and Nasdaq to highest levels since late-August, indicating that maybe more risk was priced in than we thought,” Deutsche Bank’s Jim Reid said. “The latest driver were comments from Republican Speaker McCarthy, who said ‘I can see now where a deal can come together’, and that the negotiators were in a ‘much better place.'”

Rates eased back after gains yesterday. The 10-year Treasury yield (US10Y) rose 5 basis points to 3.69%. The 2-year yield (US2Y) gained 6 basis points to 4.33%.

“Lower long-term US government bond yields have been a big help for equities this year,” strategist Ben Laidler said. “They have boosted the present-value-of-future-cash flows and pushed stock valuations up. With earnings under pressure this has driven all returns this year.”

“The good news is that yields are likely to stay down, and be supportive,” he added. “Every 0.5% move in the US 10-year bond yield changes our fair-value P/E valuation multiple for the S&P 500 by +/- 8%. With yields moving inversely to prices, it’s also positive for long duration bonds (IEF) (TLT).”

Powell is set to speak at 11 a.m. ET on a “Perspectives on Monetary Policy” panel. Before that, New York Fed President John Williams speaks at 8:45 a.m. ET and Fed Governor Michelle Bowman is up at 9:00 a.m. ET.

On Thursday there was some hawkish Fed speak that prompted bonds to sell off. Dallas Fed President Lorie Logan said she didn’t see the progress needed for a pause in the hiking cycle.

“The drone of central bank speak dominates the calendar again,” UBS chief economist Paul Donovan said. “ECB President Lagarde is speaking, but markets are unlikely to care. Federal Reserve President Williams is another matter – Williams represents a voice of intellectual economic leadership at the Fed.”

“US Fed Chair Powell and former Fed Chair Bernanke are sharing a stage today,” he said. “Sadly, this is not an economists’ Thunderdome, where two Fed Chairs enter and only one may leave. Bernanke is very unlikely to do anything so crass as criticize (his) successor. Bernanke’s time at the Fed was marked by new thinking on central bank policy. Powell’s time at the Fed has been marked by a wild chant of ‘hike, hike, hike.'”

Among active stocks, Farfetch surged 20% on stronger-than-expected sales.

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