Stocks slipped on Monday as investors readied for a week that holds key US inflation data and the start of the first-quarter earnings season.
Futures for the Dow Jones Industrial Average fell 100 points, or 0.3%, after the index ended 137 points higher on Friday at 34,721. S&P 500 futures signaled a start 0.6% into the red with the Nasdaq on track to open 1% lower.
Overseas, the pan-European Stoxx 600 fell 0.5%. Paris’ CAC 40 outperformed other indexes in the region — moving 0.3% higher — after first-round election results showed President Emmanuel Macron with a greater lead than polls had suggested over far-right challenger Marine Le Pen. Stocks in Asia were broadly lower, with Hong Kong’s Hang Seng Index tumbling 3% amid fears of the Covid-19 outlook in China.
Investors remain focused on monetary policy and rising prices.
The Federal Reserve is expected to hike interest rates many times this year and next as it battles historically high inflation, as well as engage in quantitative tightening through reducing the size of its balance sheet. Last week, comments from a number of officials at the central bank and the minutes from the last Fed meeting suggested the Fed will move aggressively to tighten policy, with a sizable half-point rate hike expected soon.
“Last week’s unexpectedly aggressive pivot by several Fed officials, who are normally considered to be of a more dovish persuasion, [has seen] US 10-year, 5-year and 2-year yields hit their highest levels in over three years,” said Michael Hewson, an analyst at broker CMC Markets.
The yield on the benchmark 10-year US Treasury yield rose above 2.76% on Monday after ending Friday at 2.71%, trading around the highest levels since the end of 2018 and beginning of 2019.
Rising yields have put pressure on tech stocks in particular, with the tech-heavy Nasdaq on track to underperform. High-growth companies like those in the tech sector have market valuations that bank on profits years into the future, and elevated yields discount the present value of future cash.
“After a positive start to the week, US equity futures took a hit as bond yields rose across the curve, indicating that the recovery from last week’s selloff will prove to be hard,” said Hussein Sayed, a strategist at broker Exinity. “The fight against inflation is and will remain the number one factor in moving markets, and this week sees a lot of fresh data to digest.”
In the spotlight this week will be a key US inflation reading. The release Tuesday of the consumer-price index for March will be the last CPI data the Fed receives before its next meeting on monetary policy.
Also in focus is the start of the first-quarter earnings season. While just 15 companies in the S&P 500 will report results, they include major US financial groups JPMorgan Chase (ticker: JPM) and BlackRock (BLK) on Wednesday, before Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS) , and Wells Fargo (WFG) on Thursday.
In the commodity space, oil prices dropped 2.5%, with futures for US benchmark West Texas Intermediate crude down to $96 a barrel. The Russia-Ukraine war, which has roiled commodity markets for almost two months and pushed WTI up as high as near $130, continues to constrain global crude markets.
“In Asia, a darkening Covid-19 outlook in China has prompted growth and consumption fears, sending Chinese equities and oil prices sharply lower today,” said Jeffrey Halley, an analyst at broker Oanda. “Short of Iran and Venezuela returning to international markets, even with larger China lockdowns, the world still faces a structural oil deficit for the next 6 months because of Russian sanctions.”
Cryptocurrencies were lower, in line with stocks. Bitcoin prices lost more than 1% over the past 24 hours and were holding above $42,000; the leading digital asset was trading above $45,000 less than a week ago. Smaller peer ether lost almost 3% to around $3,150.
Here are three stocks on the move Monday:
Twitter (TWTR) fell 4.5% in premarket trading after CEO Parag Agrawal said Sunday that Elon Musk — the CEO of Tesla (TSLA) who recently took a 9.2% stake in the social media group — wouldn’t be joining the Twitter board, after all.
Ericsson (ERIC) fell 1% in premarket trading after the Swedish telecom group said that it had suspended its business in Russia and recorded a 900 million Swedish krona ($95 million) impairment in the first quarter as a result.
Societe Generale (GLE.France) rose more than 6% in Paris trading after the French banking giant said it would dive from Russia with the sale of its Rosbank stake to Russian oligarch Vladimir Potanin.
Write to Jack Denton at [email protected]
Credit: www.marketwatch.com /