US stocks pared early gains as losses among the biggest tech companies weighed on major averages ahead of a series of megacap earnings this week. Treasury bills fell.
The S&P 500 fluctuated after rising more than 1% in early trading. The Nasdaq 100 slipped more than 1%. Chinese stocks listed in the United States plunged after the country’s stock index fell as President Xi Jinping consolidated his power. Alphabet Inc., Microsoft Corp. and Meta Platforms Inc. are among the megacaps expected to report earnings this week.
Risky assets struggled to hold onto their gains in a carryover from Friday, when reports that the Federal Reserve may soon begin to scale back the scale of its rate hikes pushed stocks higher by more than 2 %. Monday’s data indicated that Fed tightening was starting to hit the economy, with purchasing managers’ indicators showing contraction in the services and manufacturing sectors. Earnings remain the focus, with investors nervous about whether companies can generate profits with inflation-crimping margins.
“Earnings season has only just begun, but so far with 20% of companies (notably big banks) the results confirm once again that the overall earnings picture is not collapsing,” said writes Michael Purves, founder and CEO of Tallbacken Capital. “Big tech earnings are the story this week, and given the index’s outsized weighting, we can’t stress how important it is that they perform reasonably well.”
Fed policy remains a key objective for investors. Comments from San Francisco Fed Chair Mary Daly on Friday added to tentative optimism that the central bank may seek to slow its pace of rate hikes after the much-anticipated hike at its next meeting.
“In our view, we are certainly not out of the woods yet,” but the Fed’s efforts since pivoting policy to tackle inflation as well as the resilience of the economy in difficult times — and some rumblings among Fed speakers that although November’s rate hike could indeed be 75 basis points, the Fed may not have to be so authoritarian in December — drew attention attention from market participants,” wrote John Stoltzfus, chief investment strategist at Oppenheimer.
Other investors are more cautious in their expectations that the central bank will moderate its rhetoric.
“While it is encouraging that Fed officials have begun to signal an end to rate hikes, any such pause will remain conditional on lower inflation and a cooling labor market,” wrote Mark Haefele, Chief Investment Officer at UBS Global Wealth Management. “That hasn’t been seen in the data yet.”
A gauge of dollar strength rose as the yen tumbled amid signs of a second intervention by Japanese authorities in two sessions. UK bonds held on to their gains as Penny Mordaunt dropped out of the UK leadership race, with Rishi Sunak now set to become prime minister.
Key events this week:
- Revenue due this week includes: Apple, Microsoft, Exxon Mobil, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Bank of China, Boeing, Caterpillar, Cnooc, Coca-Cola, HSBC, Intel, McDonald’s, Mercedes-Benz, Merck, Samsung Electronics, Shell, UBS, UPS, Vale, Visa, Volkswagen
- PMI for the United States, Monday
- US Conference Board Consumer Confidence, Tuesday
- Bank of Canada rate decision Wednesday
- ECB rate decision Thursday
- US GDP, durable goods orders, first jobless claims, Thursday
- Bank of Japan policy decision Friday
- US Personal Income, Personal Spending, Pending Home Sales, University of Michigan Consumer Sentiment, Friday
Some of the major movements in the markets:
Shares
- The S&P 500 fell 0.2% at 10:27 a.m. PT
- The Nasdaq 100 fell 1.2%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 rose 1.3%
- The MSCI World index rose 1.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.5%
- The euro was little changed at US$0.9858
- The British pound fell 0.2% to settle at US$1.1280
- The Japanese yen fell 0.9% to 149.03 per dollar
Cryptocurrencies
- Bitcoin fell 1.5% to US$19,204.94
- Ether fell 0.3% to US$1,326.48
Obligations
- The yield on 10-year Treasury bills rose seven basis points to 4.29%
- Germany’s 10-year yield fell five basis points to 2.37%
- The UK 10-year yield fell 24 basis points to 3.81%
Goods
- West Texas Intermediate Crude Little Changed
- Gold futures fell 0.3% to US$1,650.80 an ounce
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