BNN Bloomberg's closing bell update: May 10, 2022
Stocks closed higher in another session marked by several twists and turns, with investors trying to make sense of comments from a multitude of Federal Reserve speakers ahead of key US inflation data on Wednesday.
The S&P 500 bounced back after a selloff that erased US$9 trillion from the US equity market this year, while the tech-heavy Nasdaq 100 outperformed following the biggest three-day wipeout in two decades. Treasury 10-year yields fell. Oil settled below US$100 a barrel, shedding almost 10 per cent in two days. Investors awaited the consumer-price index report, which is expected to show that while pressures were still elevated, inflation likely moderated in April.
“Positioning in the market is obviously very light right now and liquidity remains very challenged, so it won’t take much to move things a lot,” said Scott Ladner, chief investment officer at Horizon Investments. “I’d probably attribute this move mostly to position squaring ahead of CPI tomorrow. People don’t want to be short ahead of what is widely seen as a likely soft CPI print and a resulting squeeze higher.”
Fed officials reinforced Chair Jerome Powell’s message that half-point hikes are on the table in June and July, but a larger move could be warranted later in the year. Cleveland Fed President Loretta Mester told Bloomberg Television that “we don’t rule out 75 forever.” Her New York peer John Williams expects the central bank “will move expeditiously in bringing the federal funds rate back to more normal levels this year.” Fed Governor Christopher Waller said a strong US economy can take higher rates.
- “A market bounce after a big selloff is not uncommon,” said Lindsey Bell, chief markets and money strategist at Ally. “But it doesn’t mean we are out of the woods. And it doesn’t necessarily mean we’ve reached a bottom in the market. Investors are looking for some level of clarity on the path forward.”
- “Stocks will likely find a bottom when the Federal Reserve signals a pause in its tightening campaign, inflation shows signs of moderation or stock multiples become very attractive,” wrote Richard Saperstein, chief investment officer at Treasury Partners.
- “Despite our expectation of falling inflation and sustained growth, we believe investors should brace for further equity volatility amid significant moves in key economic variables and bond markets,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management.
- “Equities are starting to look attractive for medium-to-longer term buyers,” Peter Oppenheimer, chief global equity strategist at Goldman Sachs Group Inc., told Bloomberg Television on Tuesday. While the downside risks still lurk, “all of that really is absorbed into the market already.”
In corporate news, Peloton Interactive Inc. reported a deeper loss than analysts predicted and cut its revenue guidance, marking the latest setbacks for the once pandemic darling. Prologis Inc., the giant warehouse owner, unveiled a roughly US$24 billion all-stock offer to acquire Duke Realty Corp., taking its bid public after months of private pushback from the Indianapolis-based real estate investment trust.
Here are key events to watch this week:
- US CPI, Wednesday
- EIA crude oil inventory report, Wednesday
- San Francisco Fed President Mary Daly speaks, Thursday
- US PPI, initial jobless claims, Thursday
- University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- The S&P 500 rose 0.2 per cent as of 4 p.m. New York time
- The Nasdaq 100 rose 1.3 per cent
- The Dow Jones Industrial Average fell 0.3 per cent
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index rose 0.1 per cent
- The euro fell 0.3 per cent to US$1.0534
- The British pound fell 0.1 per cent to US$1.2318
- The Japanese yen was little changed at 130.37 per dollar
- The yield on 10-year Treasuries declined four basis points to 2.99 per cent
- Germany’s 10-year yield declined nine basis points to 1.00 per cent
- Britain’s 10-year yield declined 11 basis points to 1.85 per cent
- West Texas Intermediate crude fell 3.3 per cent to US$99.65 a barrel
- Gold futures fell 1.2 per cent to US$1,837.10 an ounce