Stocks halted a rebound from oversold levels as traders awaited more clues on the outlook for Federal Reserve policy. Oil fell after an early-week surge.
(Bloomberg) — Stocks halted a rebound from oversold levels as traders awaited more clues on the outlook for Federal Reserve policy. Oil fell after an early-week surge.
The S&P 500 erased gains. Exxon Mobil Corp. led losses in energy shares after agreeing to buy Pioneer Natural Resources Co. for $59.5 billion. Birkenstock Holding Plc is indicated to open at $39-$41, below its initial public offering price of $46. Treasury 10-year yields declined seven basis points to 4.58%. The dollar fluctuated, following its longest losing streak since July.
Markets will be on watch for any dovish hints in minutes of the September Fed that would suggest the central bank won’t follow through with a final 2023 rate hike as projected, said Anna Wong at Bloomberg Economics. The minutes are due at 2 p.m. Washington time. The producer price index rose by more than forecast in September amid higher energy costs. Investors also awaited Thursday’s consumer price index.
Read: If Bonds Trade Like Penny Stocks, Watch Inflation: Surveillance
“Tomorrow’s CPI could paint a different picture, but today’s PPI suggests we haven’t seen the end of sticky inflation — and high interest rates,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “Either way, investors will need to remain patient. Lowering inflation significantly from last year’s highs was one challenge, getting it down to the Fed’s 2% target level is another.”
Fed Governor Christopher Waller said the US central bank can “watch and see” what happens before taking further action with interest rates as financial markets tighten. Meantime, Governor Michelle Bowman noted rates may need to rise further and stay higher for longer than previously expected. Yet her remarks sounded somewhat less hawkish than her comments on Oct. 2.
Wall Street analysts are boosting US earnings forecasts even before results start rolling in, signaling the worst of the profit slump is likely over as ebbing inflation eases the pressure on a broad swath of industries.
That’s pushed an indicator known as earnings-revision momentum — a gauge of upward-to-downward changes to expected per-share earnings over the next 12 months — to roughly positive territory and well over its November 2022 low of negative 70%, according to data compiled by Bloomberg Intelligence. It’s the most positive reading ahead of an earnings season since the first quarter of 2022, with forecasts recently only getting marked up after executives deliver the latest guidance.
Bank of America Corp. strategists predict US companies will deliver financial results that substantially beat analyst expectations, prompting a boost to their 2023 earnings estimate as a recovery gets underway this reporting season. The expectation is for a “sizable” beat, strategists including Ohsung Kwon and Savita Subramanian wrote.
JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co. will kick off the earnings season Friday, with the biggest US banks poised to write off more bad loans than they have since the early days of the pandemic as higher-for-longer interest rates and a potential economic downturn put borrowers in a bind.
Key events this week:
- Japan machinery orders, PPI, Thursday
- Bank of Japan’s Asahi Noguchi speaks, Thursday
- UK industrial production, Thursday
- US initial jobless claims, CPI, Thursday
- European Central Bank publishes account of September policy meeting, Thursday
- Fed’s Raphael Bostic speaks, Thursday
- China CPI, PPI, trade, Friday
- Eurozone industrial production, Friday
- US University of Michigan consumer sentiment, Friday
- Citigroup, JPMorgan, Wells Fargo, BlackRock results as the quarterly earnings season kicks off, Friday
- G20 finance ministers and central bankers meet as part of IMF gathering, Friday
- ECB President Christine Lagarde, IMF Managing Director Kristalina Georgieva speak on IMF panel, Friday
- Fed’s Patrick Harker speaks, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.1% as of 12:29 p.m. New York time
- The Nasdaq 100 rose 0.2%
- The Dow Jones Industrial Average fell 0.2%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0603
- The British pound was little changed at $1.2292
- The Japanese yen fell 0.2% to 149.08 per dollar
Cryptocurrencies
- Bitcoin fell 2.6% to $26,688.5
- Ether was little changed at $1,558.65
Bonds
- The yield on 10-year Treasuries declined seven basis points to 4.58%
- Germany’s 10-year yield declined six basis points to 2.72%
- Britain’s 10-year yield declined 10 basis points to 4.33%
Commodities
- West Texas Intermediate crude fell 1.8% to $84.40 a barrel
- Gold futures rose 0.7% to $1,888.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Isabelle Lee.
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