Stocks dip from record highs with US inflation data on deck
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 7, 2024. REUTERS/Brendan McDermid/File photo
NEW YORK -A gauge of global stocks retreated for a second straight session on Monday, easing further from a record high ahead of U.S. inflation data this week which could heavily influence the Federal Reserve’s interest rate path.
Stocks have hit multiple record highs this year, but declined on Friday following a mixed U.S. payrolls report that did little to alter expectations for the Fed to begin cutting rates in June.
U.S. inflation data is due on Tuesday in the form of the consumer price index (CPI), with expectations for a monthly increase of 0.4 percent and 3.1 percent on an annual basis.
The Dow Jones Industrial Average rose 46.97 points, or 0.12 percent, to 38,769.66. The S&P 500 lost 5.74 points, or 0.11 percent, at 5,117.95 and the Nasdaq Composite fell 65.84 points, or 0.41%, to 16,019.27.
“There are two ways stocks can get hit here – in the very, very near-term you can get an upside surprise to CPI and you get further inversion of the yield curve and that just kind of punts the eventual reckoning down the street a few blocks,” said Brian Nick, senior investment strategist at The Macro Institute in New York.
READ: US consumer confidence ebbs in Feb; inflation expectations fall
“But what we’re more concerned about is that there’s emerging weakness in a lot of the current activity.”
Treasury yields up
U.S. Treasury yields edged up ahead of the data, with the benchmark U.S. 10-year notes up 1 basis point at 4.098 percent, from 4.088% late on Friday. The 2-year note yield, which typically moves in step with interest rate expectations, rose 5 basis points to 4.536 percent.
The Fed is scheduled to release its next policy statement on March 20 and investors have all but ruled out a cut, with expectations at 97 percent the Fed will hold rates steady, according to CME’s FedWatch Tool.
Last week, comments from Fed Chair Jerome Powell and European Central Bank policymakers buoyed expectations that rate cuts will begin this summer. Expectations for a cut of at least 25 basis points (bps) at the June meeting are currently above 70 percent.
READ: Market hopes high that central banks will cut rates around mid-year
MSCI’s gauge of stocks across the globe fell 2.55 points, or 0.33 percent, to 768.75.
The STOXX 600 index closed down 0.35 percent, while Europe’s broad FTSEurofirst 300 index ended down 6.47 points, or 0.32 percent, weighed down by technology sector declines.
June rate cuts
The dollar index gained 0.17 percent at 102.85, with the euro down 0.12 percent at $1.0924. Sterling weakened 0.37 percent at $1.281.
The Japanese yen strengthened 0.09 percent against the greenback at 146.94 per dollar. The yen had strengthened earlier in the day after Reuters reported a growing number of Bank of Japan policymakers are warming to the idea of ending negative interest rates this month.
READ: Yen firm as bets build for imminent BOJ rate hike
In addition, data released on Monday showed Japan was not in recession after economic growth was revised up to an annualized 0.4 percent for the December quarter.
Crude prices were mixed, as U.S. crude settled down 0.1 percent at $77.93 a barrel and Brent settled at $82.21 per barrel, up 0.16 percent to on the day as concerns eased that fighting in the Middle East would disrupt supply and Chinese data suggested weak demand, while an increase in U.S. refining limited any selling.
In cryptocurrencies, bitcoin gained 5.37 percent at $72,090.50 after hitting a record $72,901.94.
