S&P 500 Jumps 3% After Washout as Bond Yields Sink

U.S. coal prices surged past $200 for the first time as a global energy crunch drives up demand for the dirtiest fossil fuel. Oil rallied as the OPEC+ alliance considers slashing production to revive prices when it meets this week.

Yardeni’s Views

The Fed should consider stopping its tightening campaign after one more rate hike in November, according to Ed Yardeni, who coined terms like “Fed Model” and “bond vigilantes.”

The stress in financial markets from big rate increases, a surging dollar and quantitative tightening has reached the point that officials should make financial stability the top priority, he added.

“Investors are starting to doubt central banks globally will remain aggressive with fighting inflation as financial stability risks are growing,” said Ed Moya, senior market analyst at Oanda. “It is too early to call for a Fed pivot, but it seems the action in Treasury markets suggests traders are growing confident that the global growth slowdown is starting to drag down pricing pressures.”

More Turbulence Ahead

Despite the rebound in stocks and bonds, markets are bracing for more turbulence as a crucial reading on the still-tight U.S. labor market is set to give traders a chance to reassess the Fed’s commitment to its aggressive path of rate hikes.

Friday’s release of September job figures looms as a test of the central bank’s plan to rein in inflation by tightening policy further and unwinding its mammoth balance sheet.

Brazilian assets soared after President Jair Bolsonaro secured his way to a runoff election against Luiz Inacio Lula da Silva as investors cheered on the incumbent’s better-than-expected showing and bet his leftist challenger will be forced to moderate his stances in the second stretch of the race. The real was the best-performing among the world’s major currencies Monday.

After two consecutive months of declines, Bitcoin advocates are hoping that the largest cryptocurrency reverts to form in October, which has typically been one of its best months for gains. The virtual currency tends to rise roughly 25% in October and has, since 2015, advanced more than 85% of the time during it, according to Bespoke Investment Group.

Traders are betting it will take a bigger UK government policy U-turn to restore credibility with markets. Wagers against the pound over the next year have climbed to a record high in the options market, even after Chancellor Kwasi Kwarteng said he will scrap a proposed tax cut for the country’s highest earners.