US Stocks Fall on Interest Rate Problems; Dollar Fall: Markets Wrapped

(Bloomberg) — Stocks and US Treasurys fell as traders assessed the Federal Reserve’s path next year after central bank officials pledged to keep raising interest rates until they are confident inflation will ease.

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The S&P 500 fell and the tech-heavy Nasdaq 100 lost more than 1%. The decline in shares of Microsoft Corp. and Apple Inc. and Amazon.com on both indices. The initial rally in shares of Tesla Inc. has faded away. After Elon Musk suggested he might back down from Twitter Inc. Treasury yields rose, with the policy-sensitive two-year yield around 4.25%.

Investors are still on edge after recent rhetoric from the Federal Reserve and other hawkish central banks around the world. Sentiment remained sour after former New York Fed President and Bloomberg Opinion columnist William Dudley told Bloomberg TV on Monday that bullish markets could make the central bank more hawkish. ECB Governing Council member and Bundesbank president Joachim Nagel said it would take some time for inflation to slow to the central bank’s 2% target, which also dampened the mood on Monday.

“Those who were in the year-end rally camp are now second-guessing their investment thesis,” wrote JC O’Hara, chief market technician at MKM Partners. “The markets probably put a great deal of faith in Santa Claus and the high he usually brings.”

But some investors are looking forward to past fears of an economic recession caused by higher interest rates, betting instead that inflation could peak, which would allow the Federal Reserve and its peers some latitude in their tightening policy.

“I’m kind of in the camp that they were in February, and I think they’ll pick up again in March, but that’s probably it,” said Matt Brill, head of US investment grade and senior portfolio manager at Invesco. on Bloomberg TV. “We’re 90%-95% of the way we’re doing here. I think the ground is kind of prepared and the worst is definitely behind us.”

Meanwhile, US homebuilder sentiment plummeted in December to a level not seen in more than a decade outside the pandemic, amid soaring mortgage rates and construction costs.

The dollar fell as investors weighed on Fed rate expectations ahead of fresh economic data this week. The euro strengthened after a series of hawkish comments from interest rate setters.

Earlier, global equity investors were somewhat encouraged by China’s top leaders’ pledge to boost the economy next year by reviving consumption and supporting the private sector. Oil rose.

Main events this week:

  • China’s main interest rates, Tuesday

  • Bank of Japan interest rate decision, Tuesday

  • Residences begin in the US, Tuesday

  • Crude Oil Inventory Report from the Energy Information Administration, Wednesday

  • US Existing Home Sales, US Conference Board Consumer Confidence, Wed

  • US GDP, Initial Jobless Claims, Conf. The board’s leading indicator, Thursday

  • US Consumer Income, New Home Sales, US Durable Goods, PCE Contraction, University of Michigan Consumer Confidence, Friday

Some of the major movements in the markets:

Stores

  • The S&P 500 is down 0.9% as of 1:56 p.m. New York time.

  • The Nasdaq 100 fell 1.4%.

  • The Dow Jones Industrial Average fell 0.6%.

  • MSCI World Index fell 1.1%

currencies

  • The Bloomberg Spot Dollar Index fell 0.2%.

  • The euro rose 0.3 percent to $1.0616

  • The British pound rose 0.1% to $1.2165

  • The Japanese yen fell 0.1 percent to 136.79 per dollar

Digital currencies

  • Bitcoin fell 1.1 percent to $16,561.17

  • Ether fell 1.1% to $1,169

bonds

  • The yield on the 10-year Treasury note advanced nine basis points to 3.57%.

  • Germany’s 10-year yield advanced five basis points to 2.20%

  • The UK 10-year yield advanced 17 basis points to 3.50%.

goods

  • West Texas Intermediate crude rose 1.7 percent to $75.56 a barrel

  • Gold futures fell 0.1 percent to $1,798.10 an ounce

This story was produced with help from Bloomberg Automation.

– With assistance from Vildana Hajric and Sujata Rao.

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