LIVE MARKETS-HSBC believes risk rally has room to run

Dow ~flat; S&P 500 inches red; Nasdaq dips Energy biggest gainer among S&P 500 sectors; cons disc down most Dollar, bitcoin dips; gold higher, crude jumps >1.5% U.S. 10-Year Treasury yield eases to ~4.14% Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at HSBC BELIEVES RISK RALLY HAS ROOM TO RUN With Wall Street’s main indexes hitting a series of record highs, emerging market local debt up 15% year-to-date, and credit spreads at cycle tights, HSBC strategists believe the rally is far from over. “The broad-based asset price inflation is continuing on full throttle. And we think there’s more to come,” HSBC said in a note led by Chief Multi-Asset Strategist Max Kettner. Despite signs of strain in the U.S. labor market and rising delinquencies and higher tariffs, HSBC remains bullish. It argues that the uneven nature of the U.S. recovery, where lower-income households are under pressure while broader growth reaccelerates, is actually supportive for risk assets. This dynamic increases the likelihood of rate cuts from the Federal Reserve. HSBC says this environment helps keep yields below levels that would hurt valuations and supports further upside in equities, credit, and emerging markets. The bank favors cyclicals and financials within equities, remains overweight emerging market equities and local rates, and expects gold to outperform long-duration U.S. bonds. It is underweight U.S. Treasuries, gilts, and Japanese government bonds, citing concerns around debt sustainability and central bank independence. HSBC also sees Japanese bank stocks benefiting from a potential rate hike by the Bank of Japan in October. Wall Street’s main indexes were little changed in Tuesday afternoon trading after remarks from Fed Chair Jerome Powell reiterated the central bank is in a “challenging situation” as it balances sticky inflation against weak job growth. The S&P 500 and Nasdaq remained in the red, while the Dow was essentially unchanged. (Medha Singh) EARLIER ON LIVE MARKETS: WITH FED RATE CUTS PRICED IN, INVESTORS SHOULD CONSIDER TREASURY HEDGES CLICK HERE TWO-FER TUESDAY: BUSINESS ACTIVITY LOSES STEAM, CURRENT ACCOUNT BOOMERANGS ON TARIFFS CLICK HERE DOW, ENERGY STOCKS IN FOCUS; ALL EYES ON POWELL CLICK HERE APPLE NOW IN POSITIVE TERRITORY FOR 2025, JOINING THE REST OF “MAGNIFICENT 7” CLICK HERE RBC FLAGS SMALL-CAP RISK FROM HOMEBUILDER SLUMP CLICK HERE OBESITY TRADE MORPHS INTO PORTFOLIO PLAY CLICK HERE UBS TRIP FLAGS ‘L-SHAPED’ REBOUND FOR CHINA LUXURY CLICK HERE THE FISCAL FOG MIGHT BE LIFTING FOR US TREASURIES CLICK HERE STOXX RISES, BUT TRAILS WALL ST’S AI-DRIVEN RALLY CLICK HERE BEFORE THE BELL: FUTURES UP, US COURT WIN FOR ORSTED CLICK HERE NEW HIGHS IN ASIA, POWELL GETS TO SAY HIS PIECE CLICK HERE Market snapshot