(Bloomberg) — A renewed wave of dip buying spurred a rebound in stocks after a selloff triggered by economic concerns, with traders now looking to this week’s inflation data for clues on the size of Federal Reserve rate cuts.

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All major groups in the S&P 500 advanced, with the benchmark up over 1%. About 90% of its shares climbed. That’s after the gauge’s worst start to a September on record, according to Bespoke Investment Group data going back to 1953. Tesla Inc. and Nvidia Corp. led gains in megacaps. Apple Inc. retreated after unveiling a new version of its smartwatch with a bigger screen and the ability to detect sleep apnea, part of an event Monday that also includes the iPhone 16 smartphone.

“We’re seeing mostly technical dip-buying,” said Tom Essaye at The Sevens Report. “Economic growth is undoubtedly and clearly losing momentum, but a soft landing remains more likely than a hard landing. This week focus turns back to inflation.”

Treasuries saw mild moves, with traders paring the chance of a half-point rate reduction at the Fed’s September meeting to 20% from as high as 50% last week. US inflation expectations stabilized while delinquency concerns grew, according to a Fed Bank of New York survey released Monday.

The S&P 500 climbed to 5,480. The Nasdaq 100 gained 1.4%. The Dow Jones Industrial Average added 1.4%. The Russell 2000 of small caps rose 1%. Boeing Co. rallied on optimism that a labor deal will avert a strike. Alphabet Inc.’s Google heads back to court to face US Justice Department allegations it manipulates the display advertising market. Oracle Corp. is due to report results later Monday.

Wall Street’s favorite volatility gauge — the VIX — tumbled below 20.

Treasury 10-year yields fell two basis points to 3.69%. The dollar gained. Bitcoin topped $56,000.

“Equity investors are walking a sentiment tightrope between Fed rate cut cheer, recession fears, and a political wonderland,” said Craig Johnson at Piper Sandler. “Looking at popular averages through a technical analysis lens suggests last week’s weakness was just a pullback within the context of a longer-term uptrend.”

US stocks could remain choppy and see further declines in the near term amid risks around seasonality, sentiment and the presidential election, according to RBC Capital Markets strategists.

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“Any further damage would be contained within a 10%” pullback range, the team led by Lori Calvasina wrote in a note. They warn that if hard landing fears escalate, the risk of a growth scare decline in the 14%-20% range “will also admittedly rise.”

With labor market data signaling a cooling rather than an imminent recession, HSBC strategists led by Max Kettner said they were adding to their overweight position on US stocks based on a resilient third-quarter earnings outlook.

Higher volatility over the short, medium and long term will make utilities and other quality and income stocks more attractive relative to growth peers, Bank of America Corp. equity and quant strategist Savita Subramanian said Monday.

“Prefer the tortoise (quality & income) to the hare (growth & re-rating),” she wrote in a note to clients, adding that utility returns have matched those of the Nasdaq “over the long term.” Utilities are also beating tech stocks this year, Subramanian said.

Last week’s selloff in US equities has left major indexes susceptible to further declines, according to strategists at Citigroup Inc.

Large unwinds of long positions in the S&P 500 short positions indicate risk appetite turning toward more “directly bearish tilt,” the team led by Chris Montagu said. De-grossing, or closure of long and short positions by hedge funds, in the gauge is leaving gross exposure at half of its peak in mid-July, the strategists noted.

Hedge funds continued to unwind their positions in US stocks as the S&P 500 suffered its biggest weekly decline since March 2023.

Global equities were net sold for the eighth straight week led by North America, according to Goldman Sachs Group Inc.’s prime brokerage desk report for the week ended on Sept. 6. The move is a continuation of a trend that, broadly speaking, started in May as funds began a big unwind of their positions in order to get more cash readily on hand for possible dislocations around the US presidential election.

“Slowdowns do not necessarily portend recessions, nor are stock market corrections necessarily the harbinger of bear markets,” said Konstantinos Venetis at TS Lombard. “But the mix of rising macro (growth) and political (US election) uncertainty increasingly puts the burden of proof on the bulls in the near term.”

Venetis says that while the Fed is poised to ease, the question is whether “insurance” cuts prove too little too late.

“The risk is that ‘growth scare’ dynamics assume a life of their own and raise the pressure further on an equity market that already looks vulnerable from a technical standpoint, he noted.

To Mark Haefele at UBS Global Wealth Management, despite bouts of equity weakness the fundamentals for stocks remain positive.

“We expect S&P 500 companies to grow earnings by 11% this year and 8% in 2025, he said. “And historically, in the absence of a US recession, the index has gained 17% on average in the 12 months following the first Fed rate cut of a cycle.”

History suggests that the Fed’s success in piloting a soft versus hard landing will play a key role in dictating the path for US equities, according to Seema Shah at Principal Asset Management.

For example, in 1985 and 1995, she says rate cuts supported strong equity gains as recessions were avoided. Meantime, in 2001 and 2007, even aggressive easing couldn’t prevent steep market declines amid economic downturns.

“Today, the markets remain cautiously optimistic, reflecting hopes that rate cuts will avoid a downturn,” Shah said. “Yet, if economic conditions worsen sharply, fears of a recession could outweigh the benefits of rate cuts. History shows that rate cuts themselves are not the enemy — it’s the economic context in which they occur that investors should be paying close attention to.”

On Wednesday, a government report is expected to show the consumer price index rose 2.6% in August from a year earlier, according to the median forecast of economists surveyed by Bloomberg. That would be the smallest increase since 2021. There will be little new guidance from Fed officials, who are in the traditional blackout period ahead of the Sept. 17-18 meeting.

“Inflation matters,” said Chris Low at FHN Financial. “Weaker numbers might encourage the Fed toward a 50 basis-point cut, while anything higher could lock in 25 basis points. As it is, though, even if inflation is benign and some participants push for a bigger cut, we expect the Fed to land on a quarter point for a first step, with an option to cut faster at later meetings if the data support moving faster.”

Corporate Highlights:

• Discount retailer Big Lots Inc. has filed for bankruptcy protection and plans to sell the firm’s assets and ongoing business in a court-supervised process.

• PayPal Holdings Inc. added Shopify Inc. to its list of recent partnerships, reaching a deal to process some of the payment company’s debit- and credit-card transactions.

• B. Riley Financial Inc., the embattled broker-dealer and investment firm, outlined preliminary plans to sell assets and round up financing to cope with its debt burden and shore up its balance sheet.

• Starboard Value LP is pushing News Corp. to eliminate its dual-class share structure and is prepared to take further action against the media company if it refuses to engage.

Key events this week:

• China trade, Tuesday

• Germany CPI, Tuesday

• US presidential debate between Donald Trump and Kamala Harris, Tuesday

• US CPI, Wednesday

• Japan PPI, Thursday

• ECB rate decision, Thursday

• US initial jobless claims, PPI, Thursday

• Eurozone industrial production, Friday

• Japan industrial production, Friday

• U. Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 1.3% as of 1:22 p.m. New York time

• The Nasdaq 100 rose 1.4%

• The Dow Jones Industrial Average rose 1.4%

• The MSCI World Index rose 0.9%

• Bloomberg Magnificent 7 Total Return Index rose 1.6%

• The Russell 2000 Index rose 1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro fell 0.3% to $1.1053

• The British pound fell 0.2% to $1.3099

• The Japanese yen fell 0.3% to 142.77 per dollar

Cryptocurrencies

• Bitcoin rose 3.8% to $56,470.75

• Ether rose 2.7% to $2,338.8

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.69%

• Germany’s 10-year yield was little changed at 2.17%

• Britain’s 10-year yield declined three basis points to 3.86%

Commodities

• West Texas Intermediate crude rose 1.3% to $68.56 a barrel

• Spot gold rose 0.2% to $2,502.99 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Vildana Hajric.

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©2024 Bloomberg L.P.

Steel is a key building block of the modern world, going into everything from vehicles to buildings to household appliances. Steel demand is set to be robust, with a boom in mega projects (like data centers), each worth at least $1 billion. There have now been $1.4 trillion worth of mega projects announced since 2021, all of which will make heavy use of steel. But steel stocks are cyclical, so make sure you stick with companies that can best weather the full steel cycle. Here’s what you need to know.

The old way and the new way

There are two broad ways to make steel, blast furnaces and electric arc mini-mills. Blast furnaces have been around for a very long time. They use metallurgical coal and iron ore to create primary steel. These mills are vital to the world’s steel production, but blast furnaces are very expensive to operate. When steel demand is strong, blast furnaces tend to make a lot of money because they operate at high utilization rates. When steel demand is weak, they often lose money — sometimes quite a bit of money — because they aren’t selling enough steel to cover their operating costs.

The newer method of making steel, electric arc mini-mills, uses scrap metal and electricity. These mills are far easier to ramp up and down with demand, so they can operate profitably even as steel markets pull back. Electric arc mini-mills alone aren’t enough to supply the world with the steel it needs, but the more-modern technology has a clear edge on the profitability front.

Steel stocks to avoid, unless you want to play the cycle

Cleveland-Cliffs (NYSE: CLF), once a supplier of iron ore to the North American steel industry, bought its way into the steel sector by acquiring several large regional steel makers. Its portfolio of mills is dominated by blast furnaces. Iconic United States Steel (NYSE: X) was founded when the only technology available was blast furnaces. Today, it’s branching out to include electric arc mini-mills as it looks to provide a broader product line to customers. That’s better, but still not great.

Both these companies are likely to see huge earnings advances in good times, but the bad times in the steel industry will likely be quite painful, financially speaking, thanks to the steel-making technology they use.

U.S. Steel is also in the middle of a cross-border acquisition drama. There are both financial and political angles to the company’s plan to be bought out by a Japanese competitor. Most investors would likely be better off avoiding what could be a very dramatic and headline-grabbing stock.

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Two stocks to buy for the long term in the steel sector

That brings us to Nucor (NYSE: NUE) and Steel Dynamics (NASDAQ: STLD), both of which use more modern electric arc mini-mills. From this perspective, their businesses are likely to be more consistent through the cyclical steel industry’s ups and downs. They won’t likely be as profitable as U.S. Steel or Cleveland-Cliffs in good years, but they won’t be as unprofitable during bad years, either. In fact, Nucor and Steel Dynamics have a pretty impressive history of remaining profitable through the entire steel cycle, with only rare exceptions.

Nucor is the older, larger, and more diversified of the two companies. It’s more of a slow-moving giant. Steel Dynamics is the upstart, with a faster growth rate (for the steel industry) and an expanding reach, both geographically and with regard to product offerings. Conservative investors will probably prefer Nucor, while more growth-minded types will likely find Steel Dynamics appealing.

Although one could use any number of metrics to highlight these companies’ consistency, one of the easiest is dividends. Nucor is a Dividend King with a huge 51 consecutive annual dividend increases under its belt. That’s pretty incredible given the steel sector’s cyclical nature, speaking directly to its ability to reward investors while managing through good and bad times. Steel Dynamics is a much younger company, founded by former Nucor employees, with a streak of 13 consecutive annual dividend increases.

There’s opportunity in steel, but choose wisely

Given the large-scale construction boom in North America that’s starting to ramp up, investors might be thinking about jumping into the steel sector. To be fair, there are countercurrents here, notably from an increasing flow of low-priced imports that are depressing prices. But that isn’t exactly a new phenomenon, so don’t let it dissuade you from looking at the steel sector.

If you do want to put some money into steel stocks, the best options for long-term investors are likely to be Nucor and Steel Dynamics. Their businesses are advantaged relative to peers, and they have a proven track record of rewarding investors through the entire steel cycle.

The best part? Both Nucor and Steel Dynamics are between 20% and 30% below their recent highs. Now appears to be an attractive time to consider these leading steel makers for your portfolio.

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FRANKFURT, Germany (AP) — Volkswagen is considering closing some factories in its home country for the first time in the German automaker’s 87-year history, saying it otherwise won’t meet the cost-cutting goals it needs to remain competitive.

CEO Oliver Blume also told employees Wednesday that the company must end a three-decade-old job protection pledge that would have prohibited layoffs through 2029.

The statements have stirred outrage among worker representatives and concern among German politicians.

Here are some things to know about the difficulties at one of the world’s best-known auto brands.

Management says the company’s core brand that carries the company’s name needs to achieve 10 billion euros in cost savings by 2026. It recently became clear the Volkswagen Passenger Car division was not on track to do that after relying on retirements and voluntary buyouts to reduce the workforce in Germany.

With Europe’s car market smaller than before the coronavirus pandemic, Volkswagen says it now has more factory capacity than it needs — and carrying underused assembly lines is expensive.

Chief Financial Officer Arno Antlitz explained it like this to 25,000 workers who gathered at the company’s Wolfsburg home base: Europeans are buying around 2 million cars per year fewer than they did before the pandemic in 2019, when sales reached 15.7 million.

Since Volkswagen has roughly a quarter of the European market, that means “we are short of 500,000 cars, the equivalent of around two plants,” Antlitz told the workers.

“And that has nothing to do with our products or poor sales performance. The market simply is no longer there,” he said.

The Volkswagen Group, whose 10 brands include SEAT, Skoda, CUPRA and commercial vehicles, turned an operating profit of 10.1 billion euros ($11.2 billion) in the first half of this year, down 11% from last year’s first-half figure.

Higher costs outweighed a modest 1.6% increase in sales, which reached 158.8 billion euros but were held down by sluggish demand. Blume called it “a solid performance” in a “demanding environment.” Volkswagen’s luxury brands, which include Porsche, Audi and Lamborghini, are selling better than VW models.

The discussion about reducing costs focuses on the core brand and its workers in Germany. Volkswagen’s passenger car division recorded a 68% earnings drop in the second quarter, and its profit margin was a bare 0.9%, down from 4% in the first quarter.

One reason is the division took the bulk of the 1 billion euros that went to job buyouts and other restructuring costs. But growing costs, including for higher wages, and sluggish sales of the company’s line of electric vehicles are a deeper problem. On top of that, new, competitively priced competitors from China are increasing their share of the European market.

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Volkswagen must sell more electric cars to meet ever-lower European Union emission limits that take effect starting next year. Yet the company is seeing lower profit margins from those vehicles due to high battery costs and weaker demand for EVs in Europe due to the withdrawal of consumer subsidies and the slow rollout of public charging stations.

Meanwhile, VW’s electric vehicles also face stiff competition in China from models made by local companies.

The world’s automakers are in a battle for the future, spending billions to pivot to lower-emission electric cars in a race to come up with vehicles that are competitive on price and have enough range to persuade buyers to switch. China has dozens of carmakers making electric cars more cheaply than their European equivalents. Increasingly, those cars are being sold in Europe.

Profits have also declined at Germany’s BMW and Mercedes-Benz thanks to the same pressures.

Volkswagen has 10 assembly and parts plants in Germany, where 120,000 of its 684,000 workers worldwide are based. As Europe’s largest carmaker, the company is a symbol of the country’s consumer prosperity and economic growth after World War II.

It has never closed a German factory before. VW last closed a plant in 1988 in Westmoreland, Pennsylvania; its Audi division is in discussions about closing an underutilized plant in Belgium.

Far-right parties fueled by popular disenchantment with German Chancellor Olaf Scholz’s quarreling, three-party coalition government scored major gains in Sept. 1 elections in Thueringia and Saxony states, located in the former communist East Germany. Nationwide polls show the government’s approval rating at a low point. Plant closings are the last thing the Scholz government needs.

The chancellor spoke with VW management and workers after the possible plant closings became known but was careful to stress that the decision is a matter for the company and its workers.

Why hasn’t Volkswagen already made the cost cuts management wants?

Employee representatives have a lot of clout at Volkswagen. They hold half the seats on the board of directors. The state government, which is a part-owner of the company, also has two board seats — together with the employee representatives a majority — and 20% of the voting rights at the company. Lower Saxony Gov. Stephan Weil has said the company needs to address its costs but should avoid plant closings.

That means management will have to negotiate – a process that will take months.

Managers at the employee assembly faced several minutes of boos, whistles and tooting horns before they could start their presentation on the potential explanation. “We are Volkswagen, you are not,” workers chanted.

Daniela Cavallo, who chairs the company works council representing employees, said the council “won’t go along with plant closings.” Reducing labor costs won’t turn around Volkswagen’s financial situation, she argued.

“Volkswagen’s problem is upper management isn’t doing its job,” Cavallo said. “There are many other areas where the company is responsible… We have to have competitive products, we don’t have the entry-level models in electric cars.”