Stocks Pull Back From Session Lows; Treasuries Bid: Markets Wrap

(Bloomberg) -- US stocks fell, though traded off session lows, as investors weighed risks that inflation and hawkish central bank policy will erode corporate earnings and economic growth. 

The S&P 500 pared losses amid gains in defensive sectors such as health care and consumer staples, after the benchmark sank to the lowest intraday level since November 2020. The Nasdaq 100 underperformed, dropping 1%. Meta Platforms Inc. fell with other big tech names sensitive to rising rates. 

Treasuries were mixed, with yields on the short-end of the curve falling from multiyear highs. 

The mood remains fragile after a four-day losing streak wiped $1.6 trillion off the value of the S&P 500 Index. US inflation data Thursday may seal the case for another 75-basis-point interest-rate increase in the absence of a major shortfall, given the swaps market is almost fully pricing in such a move at the Federal Reserve’s next meeting. Nor have officials given any inclination to pause their rate-hiking cycle in the near future.

Strategists are also bracing for weak profits against a drumbeat of warnings over the rising risk of a global recession. The International Monetary Fund joined the refrain, warning of a worsening outlook as efforts to curb inflation may add to damage from the war in Ukraine and China’s slowdown. Big US banks kick off the third-quarter earnings season in earnest later this week.

“We have not seen the impact of tightening,” Michael Kelly, head of the multi-asset team at PineBridge Investments told Bloomberg TV. “That lies ahead and when we see that, it’s another leg down for risk assets.” 

Yields on two-year Treasuries slipped to around 4.27% after earlier hitting the highest since 2007. The 30-year yield briefly touched a fresh 2014 high in the US session.

Turmoil in UK bond markets eased Tuesday as the Bank of England was forced to expand its emergency measures to tackle what it called “fire-sale dynamics.” 

Meanwhile, Russian President Vladimir Putin threatened further missile attacks on Ukraine after hitting Kyiv and other cities in the most intense barrage of strikes since the first days of its invasion.

“It’s little wonder investors enter the week in a dreary mood, especially with headlines from Ukraine signaling a further escalation in geopolitical tensions,” Christopher Smart, chief global strategist at Barings, said in a note. 

With world growth under pressure, US oil futures tumbled about 2%, giving up more of last week’s 17% rally. 

Key events this week:

• Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock Inc., Delta Air Lines Inc., UnitedHealth Group Inc., U.S. Bancorp, Wells Fargo & Co.
• Fed’s Loretta Mester speaks, Tuesday
• BOE’s Andrew Bailey speaks, Tuesday
• FOMC minutes for September meeting, Wednesday
• US PPI, mortgage applications, Wednesday
• OPEC Monthly Oil Market Report, Wednesday
• Fed’s Michelle Bowman and Neel Kashkari speak
• ECB’s Christine Lagarde speaks
• US CPI, initial jobless claims, Thursday
• G-20 finance ministers and central bankers meet, Thursday
• China CPI, PPI, trade, Friday
• US retail sales, business inventories, University of Michigan consumer sentiment, Friday
• BOE emergency bond buying is set to end, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.6% as of 10:50 a.m. New York time
• The Nasdaq 100 fell 1.1%
• The Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 fell 0.6%
• The MSCI World index fell 1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $0.9705
• The British pound rose 0.2% to $1.1077
• The Japanese yen was unchanged at 145.72 per dollar

Cryptocurrencies

• Bitcoin fell 0.9% to $19,059.27
• Ether fell 1.8% to $1,284.14

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.91%
• Germany’s 10-year yield declined two basis points to 2.32%
• Britain’s 10-year yield was little changed at 4.46%

Commodities

• West Texas Intermediate crude fell 1.8% to $89.51 a barrel
• Gold futures rose 0.1% to $1,677 an ounce

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