JPMorgan trading desk turns tactically bullish on U.S. equities

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JPMorgan bullish on U.S. equities

Highlights

JPMorgan trading desk turns tactically bullish on U.S. equities, citing improving macro fundamentals, strong consumers, stabilizing bond yields, and positive technical patterns.
Following a spike in the 10-year Treasury yield above 5.3% last week, yields eased after softer U.S. inflation and employment data, while S&P 500 marked back-to-back gains Thursday and Friday.
JPMorgan maintains an overweight stance on technology and banks, expecting the AI theme and a steeper yield curve to benefit both sectors amid shifting rate expectations.

Shift in market stance after yield volatility

As reported by CNBC, JPMorgan's trading desk says it is once again "tactically bullish" after spending recent weeks in a more cautious stance on the market.

In a Monday note, the desk says its more constructive view is driven by improving macro fundamentals, consumer strength, earnings expectations, stabilizing bond yields and supportive technicals. Traders add that after a rapid rise in yields earlier in the week, bond markets stabilized and expectations for an October rate hike declined sharply.

The desk says the recent move in yields has concentrated markets, and that a broader advance would support investor sentiment if bond yields hold steady or move lower. That follows a period in which the benchmark 10-year Treasury yield rises above 5.3% last week, its highest level since 2002, while the 30-year bond yield also reaches levels not seen in 24 years.

Sector preferences and rate-sensitive outlook

Yields later ease from those highs after lighter-than-expected U.S. inflation and employment data, even as the S&P 500 posts a small weekly loss. The index still records back-to-back gains on Thursday and Friday, suggesting some improvement in risk appetite.

JPMorgan traders continue to favor technology as a core long position, saying the artificial intelligence theme is likely to persist. They also prefer banks, partly because of the potential for a steeper Treasury yield curve and what they describe as a favorable capital markets outlook.

Yields are little changed early Monday, but the tone could shift after the Institute for Supply Management releases its September reading on the U.S. services sector. That report could push yields back toward multidecade highs or add downward pressure on rates, with likely implications for equity sentiment across rate-sensitive sectors.

In our earlier coverage of Wall Street futures turning lower, we noted that a pullback in technology shares coincided with 10-year Treasury yields holding near multi-year highs and investors looking for clearer signals on the Federal Reserve’s next move. We also highlighted how elevated yields and oil near $100 were reinforcing caution, even as economic data softened near-term expectations for another rate hike.

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