Stocks Erase Gains; Dollar Halts Four-Day Rally: Markets Wrap

(Bloomberg) -- Stocks erased gains, with traders sifting through economic reports and awaiting more clarity on the Federal Reserve’s monetary policy path from the Jackson Hole central bankers’ symposium later this week.

The S&P 500 was little changed. The dollar halted a four-day rally, while Treasury 10-year yields fluctuated near 3%.

Data Tuesday showed sales of new US homes fell for the sixth time this year to the slowest pace since early 2016, while business activity contracted for a second straight month, reflecting softer demand at both manufacturers and service providers.

Traders are bracing for hawkish talk at the Jackson Hole event after recent comments from Fed officials convinced many investors the central bank will continue to tighten aggressively, even into a slowing economy.

“For the moment, global sentiment is both skittish and volatile,” said Richard Hunter, head of markets at Interactive Investor. “There is little cause for optimism on the immediate horizon, with any glimmers of economic hope yet to take hold on a sustainable basis.”

The Stoxx Europe 600 slipped after euro-area economic activity declined for a second month, signaling that fears of a recession may already be coming to pass as record inflation saps demand. The euro hovered near a two-decade nadir and bond yields edged higher.

The drop in the euro-area Purchasing Managers’ Index presents a dilemma for the European Central Bank, which is raising interest rates to curb the hottest inflation in decades, even as uncertainty about the outlook is high and economic momentum fades.

Quantitative tightening by the US central bank is set to kick into gear next month, presenting another potential headwind for equities.

“The near-term outlook for equity markets remains challenging,” said Mathieu Racheter, head of equity strategy at Julius Baer. “The impact of quantitative tightening on financial markets have yet to be felt, while the earnings downgrade cycle has just started.”

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What to watch this week:

• US durable goods, MBA mortgage applications, pending home sales, Wednesday
• US GDP, initial jobless claims, Thursday
• Kansas City Fed hosts its annual economic policy symposium in Jackson Hole, Wyoming, Thursday
• ECB’s July minutes, Thursday
• Fed Chair Powell speaks at Jackson Hole, Friday
• US personal income, PCE deflator, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 10:55 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 fell 0.5%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.5%
• The euro rose 0.5% to $0.9988
• The British pound rose 0.7% to $1.1854
• The Japanese yen rose 0.9% to 136.20 per dollar

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.00%
• Germany’s 10-year yield advanced two basis points to 1.33%
• Britain’s 10-year yield advanced seven basis points to 2.59%

Commodities

• West Texas Intermediate crude rose 4.1% to $94.09 a barrel
• Gold futures rose 0.9% to $1,764.30 an ounce

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