Stocks Retreat With Focus on Earnings, Inflation: Markets Wrap

(Bloomberg) -- Stocks retreated as investors assessed whether a strong earnings performance can continue despite recent disappointments, while awaiting Wednesday’s inflation report to gauge the path of Federal Reserve tightening. 

The S&P 500 dropped for a fourth consecutive session, while the Nasdaq 100 underperformed after Micron Technology Inc., the largest US maker of memory semiconductors, said sales may come in at the low end of or below its previous guidance. Treasury yields climbed, while the dollar fell.

Focus is turning to the question of whether US consumer-price index may have peaked in June after a blowout jobs reading eased worries about a recession, while corporate performance remained generally strong. 

The rebound in US stocks has turned fragile, with stronger-than-expected economic data dulling optimism that the Fed would moderate the pace of rate hikes. Still, many are drawing confidence from corporate earnings for S&P 500 companies that have beat or met expectations in 81% of cases.

“Until inflation abates and the Federal Reserve rebalances its priorities away from inflation and toward growth, tempting rallies are likely to remain unsustainable,” Seema Shah, chief strategist at Principal Global Investors, wrote in a note to clients.

Improving confidence about the health of the US economy has undercut the haven bid for the dollar, which slid 0.2% mirroring Monday’s losses. It has fallen more than 2% since a peak in mid-July, supporting a rebound in stocks.

Elsewhere, oil reversed an earlier decline as Russian shipments via the southern leg of a major pipeline to Europe were suspended.

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What to watch this week:

• US CPI data, Wednesday
• Chicago Fed President Charles Evans and his Minneapolis counterpart Neel Kashkari due to speak, Wednesday
• US PPI, initial jobless claims, Thursday
• San Francisco Fed President Mary Daly is interviewed on Bloomberg Television, Thursday
• Euro-area industrial production, Friday
• US University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2% as of 9:31 a.m. New York time
• The Nasdaq 100 fell 0.8%
• The Dow Jones Industrial Average was little changed
• The Stoxx Europe 600 fell 0.6%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.4% to $1.0242
• The British pound rose 0.2% to $1.2112
• The Japanese yen was little changed at 134.99 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 2.79%
• Germany’s 10-year yield advanced five basis points to 0.95%
• Britain’s 10-year yield advanced two basis points to 1.97%

Commodities

• West Texas Intermediate crude rose 0.5% to $91.21 a barrel
• Gold futures rose 0.5% to $1,813.70 an ounce

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