A surprising late-day reversal took US stocks higher as investors await Friday’s jobs report to gauge how hawkish the Federal Reserve will be. Recent data pointed to a resilient US economy, buoying sentiment later in the day. 

The S&P 500 ended its losing streak on Thursday, after falling for most of the session. The Nasdaq 100 fell ended the day flat. Treasuries slumped amid a selloff that left the two-year yield at the highest in almost 15 years. The dollar surged to a record high on speculation that latest data will force the central bank to raise rates by three-quarters of a percentage point at its meeting later this month.

Several Fed officials in recent days reiterated their promise to remain aggressive to control inflation, quashing any hopes of a dovish pivot investors had come to expect after July’s inflation reading. A fresh batch of labor-market and manufacturing data this week also pointed to a resilient US economy, strengthening the central bank’s resolve. But some investors positioned themselves to take advantage of recent market dislocations, bolstered by the positive data. 

“We’re taking a more opportunistic tone when it comes to markets,” Ashish Shah at Goldman Sachs Asset Management said on Bloomberg TV. “There’s going to be a lot of back and forth through the data and you want to set yourself up to be investing because sitting in cash is really expensive right now.”

Still, stocks are entering a month that is often poor for returns, following losses in August. The S&P 500 has averaged declines of 0.6 per cent and 0.7 per cent for August and September, respectively, over the past 25 years.

“Right now you have to be patient,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “I wouldn’t try and get in the middle of this kind of reset and re-pricing we’ve seen. The markets can move pretty violently.”

Risk assets had been under pressure after China put the megacity of Chengdu under lockdown, delivering a blow to economic growth. Chengdu’s lockdown continues to ripple through the economy. Factory slowdowns in Europe and Asia also reflect dwindling demand.

Investors are also assessing political risks as Russia’s invasion of Ukraine continues and tensions in Taiwan mount, with the latter shooting down a civilian drone after weeks of complaints about incursions by unmanned aerial vehicles from China.

Russia is considering a plan to buy as much as US$70 billion in yuan and other “friendly” currencies this year to slow the ruble’s surge, before shifting to a longer-term strategy of selling its holdings of the Chinese currency to fund investment. 

“The Fed effect is now melding with other global factors such as China’s growth slowdown and Europe’s stagflation to create a more fraught global macro environment with higher rates and lower growth,” said Alvin Tan, strategist at RBC Capital Markets in Singapore. “It is this combination of hawkish central banks led by the Fed, China’s slowdown and Europe’s stagflation that is now driving volatility across global markets.”

Here are some key events to watch this week:

• ECB Governing Council members due to speak at event Tuesday through Sept. 2
• US nonfarm payrolls, Friday
• UK leadership ballot closes Friday. Winner announced Sept. 5

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3 per cent as of 4 p.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average rose 0.5 per cent
• The MSCI World index fell 0.6 per cent

Currencies

• The Bloomberg Dollar Spot Index rose 0.7 per cent
• The euro fell 1.1 per cent to US$0.9945
• The British pound fell 0.7 per cent to US$1.1541
• The Japanese yen fell 0.9 per cent to 140.20 per dollar

Bonds

• The yield on 10-year Treasuries advanced seven basis points to 3.26 per cent
• Germany’s 10-year yield advanced two basis points to 1.56 per cent
• Britain’s 10-year yield advanced eight basis points to 2.88 per cent

Commodities

• West Texas Intermediate crude fell 3.5 per cent to US$86.40 a barrel
• Gold futures fell 1.1 per cent to US$1,706.40 an ounce