US stocks fell as investors assessed the potential for policy tightening and geopolitical risks taking their toll on corporate earnings and economic growth. The dollar trimmed gains.
(Bloomberg) — US stocks fell as investors assessed the potential for policy tightening and geopolitical risks taking their toll on corporate earnings and economic growth.
The dollar trimmed gains.
The S&P 500 pulled back from session lows along with the Nasdaq 100. Still, semiconductors remained among the worst performers after Washington’s move to further restrict China’s access to US technology added to signs of slowing chip demand worldwide.
Among Fed speakers weighing in on the policy outlook Monday, Vice Chair Lael Brainard laid out a case for exercising caution, noting that previous rate increases are still working through the economy.
Chicago Fed President Charles Evans said the Fed needs to quickly get to a level where policymakers can feel comfortable pausing in order to reduce the risk of overshooting.
Turbulence gripped the UK gilt market, with the selloff accelerating despite the Bank of England extending its emergency backstop measures.
The US cash Treasury market is closed for Columbus Day. The dollar rose as signs of a new escalation in the Russia-Ukraine war also weighed on risk sentiment.
The mood remains fragile ahead of Thursday’s US inflation data and a raft of bank earnings that will kick off the third-quarter season in earnest.
A hotter-than-expected inflation reading, coming on top of last week’s strong labor print, will heap pressure on the Federal Reserve to extend 75 basis-point rate hikes beyond this year.
“The market right now is trying to digest all this data coming in and then put it alongside some sort of Fed rate-hike path,” Shawn Cruz, head trading strategist at TD Ameritrade, said in an interview at Bloomberg’s New York headquarters.
“And every time you get something that comes in not in the absolute rosy potential outcome for that data point, the market has some pretty big jitters. With the opening salvo from the earnings season coming from the banks, that’s going to drive a lot of volatility.”
Relentlessly hawkish central banks are making investors gloomy about the upcoming earnings season.
JPMorgan Chase & Co. and Citigroup Inc. are among the big banks that will unveil earnings later this week.
On the corporate front, automakers Ford Motor Co. and General Motors Co. tumbled as outlook for the industry darkened further with at least two Wall Street analysts predicting earnings will fall steeply next year.
Macau casino operators including Wynn Resorts Ltd. and Las Vegas Sands Corp. tumbled in US trading after data showed that tourism revenue fell sharply over China’s week-long National Day break.
Even after this year’s brutal selloff, markets have not priced all the risks stemming from higher interest rates and stubbornly high inflation.
More than 60% of the 724 respondents to Bloomberg’s latest MLIV Pulse survey predicted the earnings season would push the S&P 500 Index lower. Strategists at Goldman Sachs Group Inc. and Morgan Stanley warned it would be a difficult reporting season, given risks such as slowing demand and soaring costs
“The bear market will not be over until the deteriorating fundamental picture is more fully discounted,” Morgan Stanley strategists told clients.
On corporate front:
- Automakers Ford Motor Co.
and General Motors Co. tumbled as the industry outlook darkened further with at least two Wall Street analysts predicting earnings will fall steeply next year
- Macau casino operators including Wynn Resorts Ltd.
and Las Vegas Sands Corp. tumbled in US trading after data showed that tourism revenue fell sharply over China’s week-long National Day break
- Rivian Automotive Inc. declined after the electric-vehicle maker said it will recall about 13,000 vehicles it delivered to customers after discovering a minor structural defect.
Meanwhile, Britain stepped up efforts to support market functioning.
The BOE extended emergency measures backing the bond market through early next month while Chancellor of the Exchequer Kwasi Kwarteng brought forward the date at which he will deliver his much-awaited fiscal strategy.
Despite the measures, 30-year borrowing costs rose above 4.5%.
The pound slipped to trade at a 12-day low.
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.
- IMF’s World Economic Outlook and Global Financial Stability Report, Tuesday
- 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 0.3% as of 1:52 p.m.
New York time
- The Nasdaq 100 fell 0.4%
- The MSCI World index fell 0.6%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.3% to $0.9711
- The British pound fell 0.1% to $1.1070
- The Japanese yen fell 0.3% to 145.68 per dollar
Cryptocurrencies
- Bitcoin fell 0.8% to $19,338.72
- Ether fell 0.5% to $1,313.8
Bonds
- Germany’s 10-year yield advanced 15 basis points to 2.34%
- Britain’s 10-year yield advanced 23 basis points to 4.47%
Commodities
- West Texas Intermediate crude fell 0.3% to $92.36 a barrel
- Gold futures fell 1.9% to $1,677.20 an ounce
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