U.S. stocks fell late in the Monday session amid renewed declines in big tech names. Benchmark Treasury yields were little changed as investors assessed the outlook for monetary policy ahead of key inflation data later this week.
The S&P 500 declined, falling from session highs in the last hour of trading. The tech-heavy Nasdaq 100 ended near the day’s low, led lower by declines in Meta Platforms Inc., Microsoft Corp. and Alphabet Inc. Peloton Interactive Inc. soared after reports that it’s exploring takeover options. The Treasury curve steepened, though moves were subdued, and the dollar was little changed.
Investors are grappling with the prospect of the steepest monetary tightening cycle since the 1990s, with markets pricing in more than five quarter-point Federal Reserve interest-rate hikes in 2022 following a strong U.S. jobs report. The U.S. inflation report this week could lead to more market volatility. A reading north of 7 per cent, the highest since the early 1980s, is expected.
“The market is in transition,” Chuck Cumello, president and chief executive officer of Essex Financial Services, said by phone. “You’re going from an accommodative Fed to one that’s going to tighten, you’re going from a scenario last year where the federal government was literally putting money in people’s pockets to spend and that’s not happening, and you have these big geopolitical events. It’s a very challenging environment for high P/E stocks.”
Greek debt led a selloff in European peripheral bonds after European Central Bank Governing Council Member Klaas Knot said he expects a rate increase as early as in the fourth quarter. The ECB last week made a hawkish pivot, with President Christine Lagarde no longer excluding a rate hike this year. In an address to lawmakers in the European Parliament Monday, Lagarde said any adjustment to monetary policy will be “gradual.”
U.S. stocks ended higher last week, but trading was volatile amid weak numbers at U.S. tech giants including Facebook-owner Meta Platforms and positive earnings from Amazon.com Inc. A strong jobs report on Friday while good for the economy also backed the case for a hawkish Fed stance.
“We all know that global central banks are poised to have an inflection in interest rate policy; what we don’t know is how far each of them are going to go and how quickly they’re going to try to get there,” said Sarah Hunt, portfolio manager at Alpine Woods Capital Investors. “It’s this unknowing about how fast and far the Fed is going to go right now that I think is part of why you’re getting these big zig zags of up and down.”
In corporate news:
- Meta Platforms Inc. again threatened to pull Facebook and Instagram from Europe if it is unable to keep transferring user data back to the U.S.
- Frontier Group Holdings Inc.’s planned US$2.9 billion purchase of Spirit Airlines Inc., positions Bill Franke, the self-proclaimed father of ultradiscounting, to expand his global network of carriers.
- Amazon.com Inc. is more than doubling the maximum base salary it pays employees to US$350,000 from US$160,000.
Meanwhile, Bitcoin rose for a fifth consecutive day, the longest winning streak since September, as investors re-embrace risk assets across global markets. The rally in crude oil stalled at around US$92 a barrel.
In the latest on Ukraine, President Joe Biden and his French counterpart Emmanuel Macron spoke about responding to Russia’s military buildup on the Ukrainian border. Moscow has repeatedly denied that it plans an attack.
Here are some events to watch this week:
- Earnings: AstraZeneca, Commonwealth Bank of Australia, GlaxoSmithKline, Pfizer, SoftBank Group, Toyota Motor, Twitter, Uber, Walt Disney
- Federal Reserve Bank of Cleveland President Loretta Mester speaks Wednesday
- U.K. Bank of England Governor Andrew Bailey speaks Thursday
- U.S. consumer price index, initial jobless claims Thursday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.4 per cent as of 4 p.m. New York time
- The Nasdaq 100 fell 0.8 per cent
- The Dow Jones Industrial Average was little changed
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index fell 0.1 per cent
- The euro was little changed at US$1.1438
- The British pound was unchanged at US$1.3531
- The Japanese yen rose 0.1 per cent to 115.10 per dollar
Bonds
- The yield on 10-year Treasuries advanced one basis point to 1.92 per cent
- Germany’s 10-year yield advanced two basis points to 0.23 per cent
- Britain’s 10-year yield was little changed at 1.41 per cent
Commodities
- West Texas Intermediate crude fell 1 per cent to US$91.40 a barrel
- Gold futures rose 0.8 per cent to US$1,822.60 an ounce
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