U.S. Stocks Finish Lower With 10-Year Yield Topping 3%: Markets Wrap
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(Bloomberg) -- Stocks retreated after weak economic data, with traders awaiting more clarity on the Federal Reserve’s monetary policy path from the Jackson Hole central bankers’ symposium later this week.
The S&P 500 saw its third straight day of losses in a session of below-average trading volume. Treasury 10-year yields topped 3%, while the dollar halted a four-day rally.
Traders are bracing for hawkish talk at the Jackson Hole event after recent comments from Fed officials convinced many investors the central bank will continue to tighten aggressively, even into a slowing economy. Data Tuesday showed sales of new US homes fell for the sixth time this year to the slowest pace since early 2016, while business activity contracted for a second straight month, reflecting softer demand at both manufacturers and service providers.
“For the moment, global sentiment is both skittish and volatile,” said Richard Hunter, head of markets at Interactive Investor. “There is little cause for optimism on the immediate horizon, with any glimmers of economic hope yet to take hold on a sustainable basis.”
Directors at two of the Fed’s 12 regional branches -- St. Louis and Minneapolis -- favored a 100 basis-point increase in the discount rate in July, signaling internal pressure for a bigger move than policy makers delivered last month.
Citigroup Inc.’s Beata Manthey said the recent rally in stocks has gone too far given the prospect of sticky inflation and the need for further interest-rate rises to tame it. While the strategist said she’s still bullish on equities over the longer term, she added that markets don’t go up in a straight line.
Quantitative tightening by the US central bank is set to kick into gear next month, presenting another potential headwind for equities.
“The near-term outlook for equity markets remains challenging,” said Mathieu Racheter, head of equity strategy at Julius Baer. “The impact of quantitative tightening on financial markets have yet to be felt, while the earnings downgrade cycle has just started.”
In corporate news, Zoom Video Communications Inc. plummeted after its results showed that the transition from an essential Covid-era tool to an enterprise business platform is going to take longer than expected. Macy’s Inc. climbed after cutting its full-year forecasts for profit and revenue in what Citigroup called a “prudent” move.
Elsewhere, US natural gas prices tumbled after the operators of a key export terminal damaged in an explosion earlier this year announced a delay to the timeline for restart. West Texas Intermediate settled above $93 a barrel after getting an extra boost as the dollar weakened, making commodities priced in the currency more attractive.
What to watch this week:
- US durable goods, MBA mortgage applications, pending home sales, Wednesday
- US GDP, initial jobless claims, Thursday
- Kansas City Fed hosts its annual economic policy symposium in Jackson Hole, Wyoming, Thursday
- ECB’s July minutes, Thursday
- Fed Chair Powell speaks at Jackson Hole, Friday
- US personal income, PCE deflator, University of Michigan consumer sentiment, Friday
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Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2% as of 4 p.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average fell 0.5%
- The MSCI World index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.3% to $0.9969
- The British pound rose 0.5% to $1.1829
- The Japanese yen rose 0.5% to 136.81 per dollar
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.06%
- Germany’s 10-year yield advanced one basis point to 1.32%
- Britain’s 10-year yield advanced six basis points to 2.58%
Commodities
- West Texas Intermediate crude rose 3.7% to $93.66 a barrel
- Gold futures rose 0.7% to $1,760 an ounce
More stories like this are available on bloomberg.com
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