US stocks wavered while an earlier advance in government bonds moderated as investors weighed whether central banks could navigate ongoing inflation-fighting campaigns while skirting a recession.
(Bloomberg) — US stocks wavered while an earlier advance in government bonds moderated as investors weighed whether central banks could navigate ongoing inflation-fighting campaigns while skirting a recession.
The S&P 500 headed lower after chopping between gains and losses. The gauge suffered its worst week since March last week. The defensive health-care sector dragged on the benchmark with Pfizer Inc. one of the worst performers after the drugmaker halted development of a weight-loss pill over safety concerns. PacWest Bancorp climbed 6.4% after selling a $3.5 billion asset-backed loan portfolio to Ares Management Corp., offloading more assets to boost liquidity amid concern about deposit outflows.
Traders are finally relenting on their bets that the Federal Reserve will cut interest rates this year after Fed Chair Jerome Powell last week warned the US may need one or two more rate increases in 2023. Investors have been growing more anxious that central banks determined to extinguish inflation will keep pushing rates higher and risk breaking fragile economies.
“Bulls should be happy with flat markets, especially in light of what happened over the weekend,” said Alec Young, chief investment strategist at MAPsignals after markets largely shrugged off the biggest threat to President Vladimir Putin’s almost quarter-century grip on power in Russia. “It continues to be a very data-driven market.”
Russian officials met key partners a day after Yevgeny Prigozhin halted the advance of his Wagner mercenary group toward Moscow.
Read: S&P 500 Is a Gift That Might Just Keep Giving: MLIV 2023 Update
Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote that the political strife in Russia is likely to have little market impact.
“Looking forward, obviously this injects more geopolitical uncertainty into the world, but as long as commodity prices don’t spike higher, the markets will largely ignore Russian political volatility,” he wrote.
The early gains in Treasuries faded with the yield on the policy-sensitive two-year edging up to 4.75% while the 10-year bond was at 3.72%.
Oil struggled to find direction, with traders alert to the risk that any prolonged turmoil in Russia could reverberate through global crude markets. The country’s war in Ukraine has already upended trade flows, with major consumers in Asia including China boosting imports of Russian energy.
“It’s hard to be really positive looking forward because the Fed is trying to engineer a slowdown,” JPMorgan’s Stephanie Roth said in an interview with Bloomberg Television. “They’re going to get a slowdown one way or another, and if we don’t get that slowdown, the Fed’s just going to have to keep hiking. So risks remain quite high.”
Key events this week:
- US new home sales, durable goods, Conference Board consumer confidence, Tuesday.
- US wholesale inventories, goods trade balance, Wednesday.
- Fed to unveil results of annual banking industry stress test, Wednesday.
- Policy panel with ECB’s Christine Lagarde, Fed Chair Jerome PowellmasbBOJ’s Kazuo Ueda and BOE’s Andrew Bailey speak, Wednesday.
- Eurozone economic confidence, consumer confidence, Thursday.
- US GDP, initial jobless claims, Thursday.
- Atlanta Fed President Rafael Bostic speaks, Thursday.
- China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday.
- US personal income and spending, University of Michigan consumer sentiment, Friday.
Some of the main moves in markets:
Stocks
- The S&P 500 was little changed as of 11:36 a.m. New York time
- The Nasdaq 100 fell 0.3%
- The Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.2% to $1.0915
- The British pound was little changed at $1.2720
- The Japanese yen rose 0.1% to 143.54 per dollar
Cryptocurrencies
- Bitcoin rose 0.1% to $30,418.15
- Ether fell 0.3% to $1,889.16
Bonds
- The yield on 10-year Treasuries declined two basis points to 3.72%
- Germany’s 10-year yield declined five basis points to 2.31%
- Britain’s 10-year yield declined two basis points to 4.30%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures rose 0.4% to $1,937.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher, Emily Graffeo and Rita Nazareth.
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