Wall Street Hit by Tech Slide, Restrictive Fedspeak: Markets Wrap

(Bloomberg) — Stocks slipped as hawkish comments from a Federal Reserve policymaker reinforced the message that the U.S. central bank is in no rush to cut interest rates, while a trio of technology heavyweights boosted U.S. stock futures burdened.

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Contracts for the S&P 500 fell 0.3%, taking Wall Street to a weaker open, while contracts for the Nasdaq fell 0.7%, undermined by premarket declines in Advanced Micro Devices Inc., Tesla Inc . and Apple Inc.

Chipmaker AMD fell more than 2.5% after it faced a U.S. government block on its plan to sell an artificial intelligence chip tailored to China. After disappointing vehicle delivery figures in China, Tesla is likely to continue Monday's decline. Weaker China sales also weighed on Apple Inc. as research showed iPhone shipments fell 24% in the first six weeks of 2024.

Investors are also nervous ahead of Fed Chairman Jerome Powell's testimony before Congress on Wednesday and Thursday. The monthly wage and salary data follows on Friday.

Powell is expected to reiterate his message that the Fed will be patient with rate cuts. That's especially true after Atlanta Fed President Raphael Bostic said Monday he expects the first rate cut – which he has planned for the third quarter – to be followed by a pause. A string of strong economic data has already forced markets to delay the first rate cut until at least the middle of the year, reducing the number of cuts this year to three.

“If Bostic wants a rate cut and then a pause, you have to wonder whether the Fed will waver on three rate cuts,” said Société Generale strategist Kenneth Broux. “The data speaks for itself and there is really no call for the Fed to cut rates.”

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“We've had three Fed rate cuts in the last two months, so the question now becomes: Do we need to cut more rates?”

In Europe, the Stoxx 600 index fell 0.2%, with automotive and mining stocks hit hardest as China's latest market support measures announced on Tuesday failed to reassure investors. Among individual stocks, defense contractor Thales SA rose after better-than-forecast results and Spirent Communications Plc surged after Viavi Solutions Inc. agreed to buy the electronic solutions provider.

Earlier, Hong Kong stocks fell as much as 3% while mainland China's benchmarks closed slightly higher after China's National People's Congress made numerous announcements on growth and inflation targets and measures to support the economy.

“Overall, I would say it's probably rather disappointing based on the announcements so far,” said Xin-Yao Ng, investment director at abrdn. “Investors continue to want stronger fiscal measures to stimulate the economy.”

In bond markets, Treasury yields fell after rising above the curve on Monday as buyers shied away from auctions for three- and six-month U.S. notes given uncertainty over Powell.

Elsewhere, gold traded near record levels while Bitcoin slipped below $67,000, still defending its record high of around $69,000.

Important events this week:

• China opens its 14th National People's Congress on Tuesday

• Eurozone S&P Global Services PMI, PPI, Tuesday

• US factory orders, ISM services, S&P Global Services PMI, Tuesday

• Super Tuesday in the US: North Carolina, California, Texas and Oklahoma are among more than a dozen states holding Republican and Democratic primaries

• Canada interest rate decision, Wednesday

• Eurozone retail sales, Wednesday

• US ADP Employment, JOLTS Vacancies, Wednesday

• Fed Chairman Jerome Powell testifies before the House Financial Services Committee on Wednesday

• The Fed issues a Beige Book on Wednesday

• The Fed's Neel Kashkari (Minneapolis) and Mary Daly (San Francisco) will speak on Wednesday

• China trade, foreign exchange reserves, Thursday

• European Central Bank interest rate decision, Thursday

• US initial jobless claims trading, Thursday

• President Joe Biden delivers the State of the Union address on Thursday

• Fed Chairman Jerome Powell testifies before the Senate Banking Committee on Thursday

• Cleveland Fed President Loretta Mester speaks Thursday

• Eurozone GDP, Friday

• US Non-Farm Payrolls, Unemployment, Friday

• New York Fed President John Williams speaks on Friday

• ECB Council member Robert Holzmann speaks on Friday

Some of the key moves in the markets:

Shares

• The Stoxx Europe 600 fell 0.2% at 11:42 a.m. London time

• S&P 500 futures fell 0.3%

• Nasdaq 100 futures fell 0.6%

• Futures on the Dow Jones Industrial Average fell 0.1%

• The MSCI Asia Pacific Index fell 0.4%

• The MSCI Emerging Markets Index fell 0.8%

Currencies

• The Bloomberg Dollar Spot Index has barely changed

• The euro was little changed at $1.0853

• The Japanese yen was little changed at 150.43 per dollar

• The offshore yuan was little changed at 7.2125 per dollar

• The British pound was little changed at $1.2685

Cryptocurrencies

• Bitcoin fell 1.3% to $66,615.82

• Ether rose 4.1% to $3,729.93

Tie up

• The 10-year Treasury yield fell three basis points to 4.18%

• The 10-year German government bond yield fell three basis points to 2.37%

• The 10-year UK government bond yield fell six basis points to 4.06%

raw materials

• Brent crude fell 0.1% to $82.68 a barrel

• Spot gold rose 0.5% to $2,125.18 an ounce

This story was produced with support from Bloomberg Automation.

– With support from Charlotte Yang and Richard Henderson.

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