Stocks Waver On Fedspeak, Disappointing Earnings: Markets Wrap

(Bloomberg) -- US stocks wavered on Thursday after a fresh batch of corporate earnings missed estimates amid a backdrop of aggressive interest-rate hikes by global central banks. The US yield curve remained inverted as recession fears persisted.

The S&P 500 fluctuated throughout the session as thin liquidity in the summer amplified market moves. The Nasdaq 100 swung between modest gains and losses. Both indexes were dragged down by the slump in Apple Inc. and Fortinet Inc.’s shares. The latter fell after trimming its service-revenue forecast. Eli Lilly & Co., which dropped after missing Wall Street expectations for second-quarter revenue, also weighed heavily on the S&P 500 Index.

Treasury yields wobbled, with the 10-year rate around 2.69% after pushing past 2.80% on Wednesday. US initial jobless claims rose slightly and are holding near the highest level since November, data showed Thursday.

A flurry of economic data that released this week assuaged fears of a downturn while hinting at stabilizing growth. But the bond market, especially the persistently inverted Treasury yield curve, is flashing warnings on the economy amid a global wave of monetary tightening. All eyes will be on the US jobs report on Friday for further clues about the Federal Reserve’s path of rate hikes. 

“There’s an intense tug-of-war happening in the economy and markets,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “On one side, you have a narrative that reasonable growth is going to support continued inflation pressure and keep the Fed hiking. The other narrative is that slowing growth is going to ease inflation and allow the Fed to stop hiking.”

On Thursday, Cleveland Fed President Loretta Mester reiterated the central bank’s promise to bring down inflation by raising interest rates. Her counterparts, this week, have also been backing this hawkish stance, forcing markets to recalibrate after initially expecting a dovish pivot Fed Chair Jerome Powell hinted at last week.

US-China tension also remains among the uncertainties clouding the outlook. China likely fired missiles over Taiwan during military drills on Thursday, Japan said, part of Beijing’s biggest cross-strait exercises in decades after US House Speaker Nancy Pelosi visited the self-ruled island. 

West Texas Intermediate dropped below $90 a barrel, a level last seen in the weeks leading up to Russia’s invasion of Ukraine. Gold advanced and Bitcoin fell.

This week’s MLIV Pulse survey is asking about your outlook for corporate bonds, mergers and acquisitions and health of US corporate balance sheets through the end of the year. It takes one minute to participate in the MLIV Pulse survey, so please click here to get involved anonymously. 

What to watch this week:

• US employment report for July, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 1:25 p.m. New York time
• The Nasdaq 100 rose 0.2%
• The Dow Jones Industrial Average fell 0.3%
• The MSCI World index rose 0.9%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%
• The euro rose 0.7% to $1.0236
• The British pound was little changed at $1.2153
• The Japanese yen rose 0.6% to 133.05 per dollar

Bonds

• The yield on 10-year Treasuries declined one basis point to 2.69%
• Germany’s 10-year yield declined seven basis points to 0.80%
• Britain’s 10-year yield declined two basis points to 1.89%

Commodities

• West Texas Intermediate crude fell 2.8% to $88.12 a barrel
• Gold futures rose 1.8% to $1,807.80 an ounce

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