US stocks slipped ahead of meeting minutes from the Federal Reserve as traders prepared to dissect the commentary to try and gauge what action the central bank will take later this month.
(Bloomberg) — US stocks slipped ahead of meeting minutes from the Federal Reserve as traders prepared to dissect the commentary to try and gauge what action the central bank will take later this month.
The S&P 500 fell 0.2% before the Wednesday release of the minutes of the Fed’s last policy meeting. The June gathering threw Wall Street for a loop as officials paused their rate-hiking cycle after 10 consecutive increases. Among Wednesday’s notable movers, United Parcel Service Inc. dropped 1.6% as employees moved closer to a strike over pay while cryptocurrency exchange, Coinbase Global Inc., fell after a downgrade.
Read more: Fed Minutes to Offer Hints on ‘Awkward’ Pause-and-Hike Message
The yield on policy-sensitive two-year Treasuries drifted lower to 4.93%, while the 10-year yield was at 3.91%. That inverted yield curve is often read as a sign of a coming economic slump. The Fed has forecast two additional rate increases this year which could further weigh on economic growth and corporate profits
“I am the most bearish I have ever been on the economy without being in a recession, and it’s because of the yield curve, the contraction of money and QT at the same time they are hiking rates,” Ed Hyman, founder and chairman of Evercore ISI, said on Bloomberg Television.
China’s sputtering recovery and the uncertain outlook for the Federal Reserve’s rate-hike cycle have tempered demand for global equities after a stellar first-half rally, driven mostly by mega-cap tech stocks.
With more interest-rate hikes anticipated from the Fed and the ECB in July, an aggregate gauge of borrowing costs calculated by Bloomberg Economics now shows a peak of 6.25% this quarter, up from 6% foreseen three months ago.
“Our view is that the recession won’t strike until next year,” said Benjamin Kirby, co-head of investments at Thornburg Investment Management. “The path of least resistance for risk markets is higher because inflation is falling, the job market and consumer spending are robust, and most professional money managers remain underweight risk.”
A gauge of the dollar rose against all its Group-of-10 peers while gold steadied. Crude hit $72 a barrel after Saudi Arabian and Russian output cuts earlier this week.
Key Events This Week:
- OPEC International Seminar, speakers including OPEC+ oil ministers, kicks off in Vienna, Wednesday
- FOMC issues minutes on June policy meeting, Wednesday
- New York Fed President John Williams in “fireside chat” at meeting of the Central Bank Research Association at the New York Fed, Wednesday
- US initial jobless claims, trade, ISM services, job openings, Thursday
- Dallas Fed President Lorie Logan speaks on a panel about the policy challenges for central banks at CEBRA meeting, Thursday
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
- The S&P 500 fell 0.2% as of 12:13 p.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average fell 0.3%
- The MSCI World index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.1% to $1.0863
- The British pound was little changed at $1.2709
- The Japanese yen was little changed at 144.60 per dollar
Cryptocurrencies
- Bitcoin fell 1.3% to $30,395.71
- Ether fell 1.9% to $1,904.88
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.91%
- Germany’s 10-year yield advanced two basis points to 2.48%
- Britain’s 10-year yield advanced eight basis points to 4.49%
Commodities
- West Texas Intermediate crude rose 3.2% to $72 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Ksenia Galouchko, Tassia Sipahutar and Robert Brand.
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