U.S. Stocks Sag As Hawkish Fedspeak Lifts Bond Yields: Markets Wrap

(Bloomberg) -- The stock market saw another down day, with Treasury yields climbing amid hawkish remarks from Federal Reserve officials and swaps pricing in a 5% peak policy rate in 2023. The pound wavered after Liz Truss resigned as UK prime minister.

A rally in the S&P 500 fizzled out after Philadelphia Fed chief Patrick Harker said policymakers are likely to raise rates to “well above” 4% this year and hold them at restrictive level -- while leaving the door open to doing more if needed. Fed Governor Lisa Cook also spoke, noting that rates will need to keep rising to get inflation under control. The current rate sits between 3% and 3.25%.

“Stocks are not out of the woods yet,” said Fawad Razaqzada, market analyst at City Index and Forex.com. “Fears over further tightening of central bank policy amid an environment of high-inflation and low-growth means investors will avoid buying stocks aggressively. Even at these relatively-inexpensive levels.”

Traders also scoured a mixed bag of quarterly results, with Tesla Inc.’s sales disappointing and International Business Machines Corp. topping forecasts. Several market observers said the bar has been lowered quite a bit ahead of the earnings season, boosting the odds of upside surprises. It’s also worth noting that there’s been no shortage of warning signals about the economy from the corporate side.

Alcoa Corp. joined metals higher, but its quarterly loss signaled a worsening environment for a company that recently warned it was being squeezed by higher costs and falling aluminum prices. And that’s a dependable barometer of the health of sectors including construction, aerospace and consumer packaging. Another worrisome signal came from Union Pacific Corp., which sees slowing freight demand.

As traders wade through corporate results, “with an extra eye on guidance, expect volatility to remain elevated,” said Mike Loewengart at Morgan Stanley Global Investment Office.

The latest batch of economic reports didn’t provide much encouragement either, with sales of previously owned US homes down for an eighth straight month -- underscoring how soaring mortgage rates are punishing the housing market. The stretch of declines is the longest since 2007, when a housing market collapse swept the economy into the Great Recession.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.7% as of 3:03 p.m. New York time
• The Nasdaq 100 fell 0.5%
• The Dow Jones Industrial Average fell 0.2%
• The MSCI World index fell 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1% to $0.9785
• The British pound was unchanged at $1.1219
• The Japanese yen fell 0.2% to 150.18 per dollar

Cryptocurrencies

• Bitcoin fell 0.6% to $19,081.46
• Ether fell 0.4% to $1,289.67

Bonds

• The yield on 10-year Treasuries advanced nine basis points to 4.22%
• Germany’s 10-year yield advanced three basis points to 2.40%
• Britain’s 10-year yield advanced three basis points to 3.91%

Commodities

• West Texas Intermediate crude rose 0.5% to $85.98 a barrel
• Gold futures were little changed

--With assistance from and .

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.