US stocks fell, with investors assessing the outlook for risk assets as uncertainty about the economy and the Federal Reserve’s policy remain. Treasuries pared earlier gains.
(Bloomberg) — US stocks fell, with investors assessing the outlook for risk assets as uncertainty about the economy and the Federal Reserve’s policy remain. Treasuries pared earlier gains.
The S&P 500 and the Nasdaq 100 dropped, after starting the first trading session of 2023 with gains. Apple Inc.’s decline, as concerns about iPhone supply in the important holiday quarter mount, pushed the firm’s market value below $2 trillion. Tesla Inc. fell after fourth-quarter deliveries missed estimates. Shares of both firms weighed on key US equity benchmarks on Tuesday.
Treasury yields declined across the curve, with the policy-sensitive 10-year yield around 3.79%, after dropping to around 3.72% earlier. Oil remained under pressure from a strong dollar.
Investors, still reeling from a spell of predictions they got wrong in 2022, expect a volatile year of trading. Federal Reserve policy will dictate how stocks and bonds perform, with some traders already seeking out opportunities resulting from risk assets getting sold off.
Recession concerns also continue to linger, with former New York Fed President William Dudley saying that an imminent slowdown won’t be severe while investors continue to mull how much Fed tightening will impact the economy. All eyes will be on the jobs report this week, as softening in the labor market remains the Fed’s focus.
“Everyone is bracing for volatility. That seems to be the common theme,” said Shawn Cruz, head trading strategist at TD Ameritrade. “Anyone I talk to, they’re expecting generally elevated levels of volatility this year. And maybe that doesn’t mean another year like we had this past year but a much choppier market.”
Signs that Covid infections may have peaked in some of China’s biggest cities buoyed sentiment earlier and spurred a rally in US-listed Chinese firms. However, China’s economy may not get the “outsized boost” people are expecting, Matt Maley, chief market strategist at Miller Tabak + Co., wrote in a note. Chris Senyek of Wolfe Research also isn’t bullish about China’s reopening.
“In our view, there’s still a massive amount of uncertainty there, and whenever growth does begin to reaccelerate, inflation headwinds are more likely than not to offset global growth tailwinds,” he said in a note.
Read More: China Vows to Hit Back at Nations Imposing Covid Travel Curbs
The main markets moves are:
Stocks
- The S&P 500 fell 0.5% as of 11:11 a.m. New York time
- The Nasdaq 100 fell 0.9%
- The Dow Jones Industrial Average fell 0.3%
- The Stoxx Europe 600 rose 1.5%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.7%
- The euro fell 1.2% to $1.0540
- The British pound fell 0.5% to $1.1990
- The Japanese yen was little changed at 130.85 per dollar
Cryptocurrencies
- Bitcoin fell 0.5% to $16,664.6
- Ether fell 0.7% to $1,210.77
Bonds
- The yield on 10-year Treasuries declined eight basis points to 3.79%
- Germany’s 10-year yield declined six basis points to 2.38%
- Britain’s 10-year yield declined three basis points to 3.64%
Commodities
- West Texas Intermediate crude fell 1.5% to $79.09 a barrel
- Gold futures rose 0.7% to $1,838.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Namitha Jagadeesh.
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