US stocks drifted and Treasury yields fell as a gauge of US services offered a less upbeat assessment of the US economy.
(Bloomberg) — US stocks drifted and Treasury yields fell as a gauge of US services offered a less upbeat assessment of the US economy.
The Institute for Supply Management’s overall gauge of services unexpectedly fell to the lowest level of the year, helping to erase earlier gains in the benchmark equities index.
A morning rally in energy stocks had briefly pushed the S&P 500 20% above a October closing low. However, the gains were later tempered by demand fears. Crude oil futures rose 1.2% while oil majors Chevron Corp. and Exxon Mobil Corp. pared gains to trade little changed.
The latest batch of economic data is offering a less-rosy assessment of the US economy as traders attempt to predict the Federal Reserve’s path forward on interest rates. There’s increasing speculation the Fed plans to keep interest rates steady in June, but keep options open for later hikes.
“Investors are now re-focusing on sticky inflation and the extremely tight labor market, prompting a repricing of the market’s rate outlook,” Seema Shah, chief global strategist at Principal Asset Management, wrote. “Not only is a further policy rate hike likely, but rate cuts this year are being steadily priced out.”
Tech stocks were little changed Monday despite Apple Inc. rising 1.8%, on track for an all-time closing high. The company is expected to launch a mixed-reality headset at the Worldwide Developers Conference on Monday, marking its most significant product launch in nearly a decade.
A recent rally in Big Tech — spurred by optimism in artifical intelligence — on top of bets the Fed will pause its rate hikes, have put stocks on the verge of a bull market. The S&P 500 briefly rose 20% from a closing low in October on Monday. Meanwhile, the CBOE Volatility Index was higher after hitting a February 2020 low last week.
Saira Malik, chief investment officer at Nuveen, said she still foresees a mild US recession, but sometime in 2024 as the “growth-dampening effects of tight monetary policy work their way through the economy.”
“In the meantime, with high inflation likely to persist, we think investors would be well-served by allocating to real assets that can provide meaningful inflation protection,” she said, pointing to farmland.
Elsewhere, equities in Europe fell while those in Asia were mostly higher. The Nikkei 225 rose 2.2% on Monday to its highest level since July 1990 as investors bet that the weak yen will boost corporate profits.
Key events this week:
- Rate decisions in Australia, Poland, Tuesday
- China forex reserves, trade, Wednesday
- 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 rose 0.2% as of 10:51 a.m. New York time
- The Nasdaq 100 rose 0.5%
- The Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.4%
- The MSCI World index rose 1.6%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0711
- The British pound fell 0.3% to $1.2413
- The Japanese yen rose 0.2% to 139.59 per dollar
Cryptocurrencies
- Bitcoin fell 1.6% to $26,802.2
- Ether fell 1.9% to $1,868.85
Bonds
- The yield on 10-year Treasuries was little changed at 3.68%
- Germany’s 10-year yield advanced six basis points to 2.37%
- Britain’s 10-year yield advanced five basis points to 4.21%
Commodities
- West Texas Intermediate crude rose 1.2% to $72.58 a barrel
- Gold futures rose 0.2% to $1,972.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from David Watkins, Hooyeon Kim, Tassia Sipahutar and Anchalee Worrachate.
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