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U.S. Stocks Swing Lower In Choppy Trade; Dollar Gains: Markets Wrap

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Stocks Swing Lower in Choppy Trade; Dollar Gains: Markets Wrap
Stocks Swing Lower in Choppy Trade; Dollar Gains: Markets Wrap

US stocks fell as investors weighed the toll policy tightening will take on company earnings and economic growth. The dollar rose.

The S&P 500 took another leg lower in volatile trading after rising as much as 0.3% and sliding 0.5%. The Nasdaq 100 led losses among major benchmarks, pressured by the semiconductor sector after Washington’s move to further restrict China’s access to US technology and signs of slowing chip demand worldwide. The cash Treasury market is closed for Columbus Day in the US.   

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 policy makers to extend 75 basis-point rate hikes beyond this year.

Signs of a dangerous new escalation in the Russia-Ukraine war weighed on risk sentiment, lifting the dollar against other currencies, while British authorities’ latest efforts to support jittery markets largely failed to reassure pound traders.

Tim Grant, head of EMEA at Galaxy Digital, discusses how cryptocurrencies are being impacted by central banks and the greater macro backdrop and looks at the state of NFTs on “Bloomberg Surveillance Early Edition.”Source: Bloomberg
Tim Grant, head of EMEA at Galaxy Digital, discusses how cryptocurrencies are being impacted by central banks and the greater macro backdrop and looks at the state of NFTs on “Bloomberg Surveillance Early Edition.”Source: Bloomberg

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.

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. 

Meanwhile, Britain stepped up efforts to support market functioning. The Bank of England 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 rising above 4.5%. The pound slipped to trade at a 12-day low.

“The BOE is going to calm the market, but it’s not going to save the market,” said Geoffrey Yu, a senior strategist at Bank of New York Mellon in London. The central bank “is not going to cap yields,” he said.

Key events this week:

  • Earnings this week include: JPMorgan Chase & Co., Citigroup Inc., Morgan Stanley, BlackRock, Delta Air Lines, Fast Retailing, Infosys, PepsiCo, TSMC, Tata Consultancy, UnitedHealth, U.S. Bancorp, Walgreens Boots, Wells Fargo, Wipro
  • Fed’s Lael Brainard and Charles Evans speak, Monday
  • 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 0.4 as of 10:35 a.m. New York time
  • The Nasdaq 100 fell 0.8%
  • The MSCI World index fell 0.5%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro fell 0.1% to $0.9730
  • The British pound fell 0.2% to $1.1059
  • The Japanese yen fell 0.2% to 145.57 per dollar

Cryptocurrencies

  • Bitcoin fell 0.6% to $19,377.48
  • Ether fell 0.4% to $1,316.11

Bonds

  • Germany’s 10-year yield advanced six basis points to 2.26%
  • Britain’s 10-year yield advanced 28 basis points to 4.52%

Commodities

  • West Texas Intermediate crude rose 0.3% to $92.96 a barrel
  • Gold futures fell 1.6% to $1,682.60 an ounce

More stories like this are available on bloomberg.com

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