US stocks drifted as a rally in technology stocks wavered, and US Treasuries fell after an unexpected increase in Canada’s interest rates.
(Bloomberg) — US stocks drifted as a rally in technology stocks wavered, and US Treasuries fell after an unexpected increase in Canada’s interest rates.
The S&P 500 was little changed after earlier gains in technology and commodity stocks. Crude oil futures in New York jumped 1.1%, driving energy producers higher. However, gains in the broader market were fleeting as traders briefly priced in a quarter point hike in US interest rates by July.
Shares of Netflix Inc. had led gains on the S&P 500 after at least two price-target hikes from analysts. And Marvell Technology Inc. was also higher on a report of an AI chip contract with Amazon.com Inc.
The frenzy surrounding artificial intelligence has driven much of the stock market’s gains as of late. The S&P 500 briefly surpassed a 20% increase from an October low on Wednesday, commonly thought of as the marker of a bull market. However, the rally in tech stocks has lost some of its steam this week.
Expectations of higher interest rates for longer, in order to combat inflation, has weighed on tech shares, which derive their value from future cash flows. Policy decisions are due from the Federal Reserve and the European Central Bank next week, with the Fed signaling it may pause rate hikes in June before resuming them later.
“One of the things I’m a little nervous about is that the rates market got a little too carried away about the central banks being able to quickly pre-emptively cut rates,” said Karen Ward, chief market strategist for EMEA at JPMorgan Asset Management, in an interview with Bloomberg TV. With rates markets pricing out some expected cuts, “that to me puts some of those growth, those megacap tech valuations, a little at risk,” she said.
Treasury Yields Nudging Higher Shows Fed in Pause-and-Hike Mode
In Europe, shares fluctuated with the OECD warning that the global economy is set for a weak recovery, dogged by persistent inflation and restrictive central bank policies. Data showed a bigger-than-expected drop in Chinese exports, raising further questions about global demand.
“Weaker global trade is not a new story but it is surprising how quickly China’s reopening boost has faded,” said Craig Erlam, a senior market analyst at Oanda. “Pressure is set to intensify on the leadership to announce new stimulus measures in a bid to revitalize the economy again.”
Read more: China Stocks Too Cheap to Ignore for JPMorgan Asset, Invesco
In currency markets, Turkey’s lira slumped about 7% to a record low against the dollar amid increasing signs that policy makers may be scaling back interventions to support the currency. President Recep Tayyip Erdogan’s appointment of former Merrill Lynch strategist Mehmet Simsek as his new Treasury and finance minister has sparked expectations of a return to more orthodox monetary policy and raised the prospect of reduced intervention in markets.
Elsewhere, a gauge of greenback’s strength fell. Gold was slightler higher. And Bitcoin was little changed in the wake of a sweeping crackdown by US regulators.
Key events this week:
- US trade, consumer credit, Wednesday
- Canada rate decision, Wednesday
- EIA crude oil inventory data, Wednesday
- Eurozone GDP, Thursday
- Rate decisions in India, Peru, Thursday
- Japan GDP, Thursday
- US wholesale inventories, initial jobless claims, Thursday
- China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.1% as of 10:51 a.m. New York time
- The Nasdaq 100 fell 0.7%
- The Dow Jones Industrial Average was little changed
- The Stoxx Europe 600 fell 0.2%
- The MSCI World index rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0707
- The British pound rose 0.4% to $1.2471
- The Japanese yen was little changed at 139.67 per dollar
Cryptocurrencies
- Bitcoin fell 1.8% to $26,456.29
- Ether fell 1.7% to $1,844.4
Bonds
- The yield on 10-year Treasuries advanced nine basis points to 3.75%
- Germany’s 10-year yield advanced six basis points to 2.43%
- Britain’s 10-year yield advanced two basis points to 4.23%
Commodities
- West Texas Intermediate crude rose 1.3% to $72.68 a barrel
- Gold futures fell 0.4% to $1,972.80 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Joanna Ossinger and Tassia Sipahutar.
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