A slide in stocks waned as data showing a drop in inflation expectations tempered concern about worrisome outlooks from big banks.
(Bloomberg) — A slide in stocks waned as data showing a drop in inflation expectations tempered concern about worrisome outlooks from big banks.
After slumping almost 1% earlier Friday, the S&P 500 posted a small loss and traded near its key 200-day moving average. Retailers led the rebound from the lows, while financial shares still underperformed.
“It’s a back-and-forth market,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “I don’t really buy the intense gloom that some people have that it’s going to get much worse, or the other extreme that we’ve already started a new bull market. I don’t think we’re there yet either.”
Read: Goldman’s Wealth CIO Says US Stocks Can Rally Despite Recession
US short-term inflation views fell in early January to the lowest in nearly two years, providing a bigger-than-expected boost to consumer sentiment. To Jeffrey Roach at LPL Financial, pricing pressures are weakening across many sectors, paving the way for the Federal Reserve to downshift its pace of hikes to 25 basis points at its next gathering.
“We shouldn’t be surprised if the Fed starts talking about pausing in the near future,” he added.
Fed Bank of Atlanta President Raphael Bostic told CBS News he’s leaning toward supporting a smaller rate hike at the next meeting following Thursday’s report showing a further slowing in prices.
Over the next few weeks, traders will get a sense on how resilient profit margins will prove to be in the face of aggressive Fed policy to knock down inflation. JPMorgan Chase & Co.’s boss Jamie Dimon said that while the economy remains strong “we still do not know the ultimate effect of the headwinds coming.”
S&P 500 earnings revisions are pointing to “a hard landing” even though the market is pricing in a soft landing, Goldman Sachs Group Inc. strategists led by David Kostin wrote. If there is no recession, as the team expects, S&P 500 earnings per share growth will be flat this year, they said.
US stocks are poised for a fresh slide before ultimately rallying in the second half of the year when economic conditions stabilize, according to Bank of America Corp. strategists led by Michael Hartnett.
Read: Summers Says Recession Still Looms, Fed Getting Closer to Done
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.3% as of 11:22 a.m. New York time
- The Nasdaq 100 fell 0.4%
- The Dow Jones Industrial Average rose 0.1%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.4% to $1.0813
- The British pound was little changed at $1.2198
- The Japanese yen rose 1.2% to 127.67 per dollar
Cryptocurrencies
- Bitcoin rose 1.6% to $19,135.85
- Ether fell 1% to $1,412
Bonds
- The yield on 10-year Treasuries was little changed at 3.44%
- Germany’s 10-year yield declined one basis point to 2.15%
- Britain’s 10-year yield was little changed at 3.34%
Commodities
- West Texas Intermediate crude rose 1.4% to $79.46 a barrel
- Gold futures rose 0.9% to $1,915.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Vildana Hajric, Emily Graffeo, Peyton Forte and Isabelle Lee.
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