(Bloomberg) – US stocks trended lower and Treasury yields fell as the US Services Gauge provided a less optimistic view of the US economy.
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The Institute for Supply Management’s composite services indicator unexpectedly fell to its lowest level for the year, helping to erase earlier gains in the benchmark stock index.
A morning rally in energy stocks had briefly pushed the S&P 500 20% above its October closing low. However, growth was later dampened by fears of demand. Crude oil futures rose 1.2% as oil giants Chevron Corp. and Exxon Mobil Corp. reduced their profits and traded little changed.
The latest economic data offers a less rosy view of the US economy as traders try to predict the Federal Reserve’s path on interest rates. There is growing speculation that the Fed is planning to keep interest rates stable in June but is keeping options open for rate hikes later.
“Investors are now turning their focus back to persistent inflation and extremely tight labor markets, leading to a reassessment of the market’s interest rate outlook,” wrote Seema Shah, chief global strategist at Principal Asset Management. “Not only is it likely that there will be another interest rate hike, rate cuts this year are also increasingly being priced out.”
Tech stocks were little changed on Monday, although Apple Inc. gained 1.8% and was on course for an all-time closing high. The company is expected to unveil a mixed reality headset at the Worldwide Developers Conference on Monday, marking its most significant product launch in nearly a decade.
A recent rally in big tech – spurred by optimism in the artificial intelligence space – and bets that the Fed will hold off on rate hikes have pushed stocks to the brink of a bull market. The S&P 500 briefly rose 20% on Monday from its October closing low. Meanwhile, the CBOE volatility index rose after hitting a February 2020 low last week.
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Saira Malik, Nuveen’s chief investment officer, said she still expects a mild US recession, but sometime in 2024 when “the growth-dampening effects of tight monetary policy spill over into the economy.”
“With inflation likely to remain high, we think investors would be wise to invest in real assets that can provide meaningful inflation protection,” she said, referring to farmland.
Elsewhere, stocks in Europe fell while stocks in Asia mostly rose. The Nikkei 225 rose 2.2% on Monday to its highest level since July 1990 as investors bet the weak yen will boost corporate earnings.
Important events this week:
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Collective bargaining decisions in Australia, Poland, Tuesday
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China’s foreign exchange reserves trading Wednesday
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US trade, consumer credit, Wednesday
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Rate decision for Canada, Wednesday
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EIA crude oil inventory data, Wednesday
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Eurozone GDP, Thursday
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Collective bargaining decisions in India, Peru, Thursday
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Japan’s GDP, Thursday
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US Wholesale Inventories, Initial Jobless Claims, Thursday
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China PPI, CPI, Friday
Some of the key movements in the markets:
Shares
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The S&P 500 was up 0.2% as of 10:51 a.m. New York time
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The Nasdaq 100 rose 0.5%
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The Dow Jones Industrial Average fell 0.2%
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The Stoxx Europe 600 fell 0.4%
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MSCI World Index up 1.6%
currencies
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The Bloomberg Dollar Spot Index is little changed
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The euro was little changed at $1.0711
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The British pound fell 0.3% to $1.2413
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The Japanese yen rose 0.2% to 139.59 per dollar
cryptocurrencies
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Bitcoin fell 1.6% to $26,802.2
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Ether fell 1.9% to $1,868.85
Bind
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The 10-year government bond yield was little changed at 3.68%
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The 10-year German government bond yield rose six basis points to 2.37%
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The 10-year UK government bond yield rose five basis points to 4.21%
raw materials
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West Texas Intermediate crude rose 1.2% to $72.58 a barrel
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Gold futures were up 0.2% to $1,972.90 an ounce
This story was created with the support of Bloomberg Automation.
– With support from David Watkins, Hooyeon Kim, Tassia Sipahutar and Anchalee Worrachate.
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