The stock market started the week on a cautious note, with traders sifting through remarks from a slew of Federal Reserve speakers and awaiting a key inflation gauge and the beginning of the US earnings season.
(Bloomberg) — The stock market started the week on a cautious note, with traders sifting through remarks from a slew of Federal Reserve speakers and awaiting a key inflation gauge and the beginning of the US earnings season.
Following a three-day slide in the S&P 500, the equity benchmark fluctuated near 4,400. The market didn’t get much support from the megacap space, with Amazon.com Inc. down 2% ahead of its annual Prime Day event. A gauge of big banks pared gains after news on a plan to boost capital requirements. The earnings season kicks off in earnest on Friday, when JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. report.
In the run-up to Wednesday’s consumer price index, the market got the latest thinking from a raft of policymakers. The central bank needs to keep hiking somewhat to make sure inflation comes down to its 2% target, Cleveland Fed President Loretta Mester said Monday. The comments were echoed by her San Francisco counterpart Mary Daly, who said the Fed will likely need to raise rates a “couple more” times.
Momentum has slowed since the market notched a strong first-half rally as concern resurfaced about the impact of the many economic crosscurrents on corporate profits. Morgan Stanley’s Michael Wilson became the latest to warn that earnings forecasts will matter more than usual this time around given elevated equity valuations, higher interest rates and dwindling liquidity.
“It’s going to be harder for the market to rally if all we get is an earnings season that is ‘not as bad as we thought’, especially since the market has become so expensive,” said Matt Maley, chief market strategist at Miller Tabak + Co.
‘Just OK’
Maley noted that this does not mean that if the guidance is “just OK” that the market will sell off meaningfully. However, if corporate outlooks show any material disappointment, “it should create some serious headwinds for the stock market,” he noted.
There’s more pain on the way for the S&P 500 as profit warnings and fears of higher interest rates combine to threaten the key US stock indicator, according to the latest Markets Live Pulse survey.
In other corporate news, a gauge of US-listed Chinese shares climbed on news the Asian nation will extend policies to support cash-strapped developers and shore up the ailing real estate sector. Icahn Enterprises LP soared as Carl Icahn renegotiated loan terms with a group of banks just months after a report by short seller Hindenburg Research sent shares in his investment firm tanking.
Key events this week:
- St. Louis Fed President James Bullard speaks, Tuesday.
- Canada rate decision, Wednesday.
- Bank of England Governor Andrew Bailey speaks, Wednesday.
- US CPI, Wednesday.
- Federal Reserve issues Beige Book, Wednesday.
- Fed speakers include Neel Kashkari, Loretta Mester, Raphael Bostic, Wednesday.
- China trade, Thursday.
- Eurozone industrial production, Thursday.
- US initial jobless claims, PPI, Thursday.
- US University of Michigan consumer sentiment, Friday.
- US banks kick off earnings, Friday.
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 11:43 a.m. New York time
- The Nasdaq 100 fell 0.1%
- The Dow Jones Industrial Average rose 0.4%
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index rose 0.1%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0987
- The British pound was little changed at $1.2829
- The Japanese yen rose 0.5% to 141.57 per dollar
Cryptocurrencies
- Bitcoin rose 0.3% to $30,305.13
- Ether rose 0.1% to $1,871.53
Bonds
- The yield on 10-year Treasuries declined four basis points to 4.02%
- Germany’s 10-year yield advanced one basis point to 2.65%
- Britain’s 10-year yield was little changed at 4.65%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures fell 0.2% to $1,928 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Brett Miller, Tassia Sipahutar, Robert Brand, Vildana Hajric, Carly Wanna and Peyton Forte.
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