Stocks Fall as Tech Rotation Falters; Bonds Drift: Markets Wrap

(Bloomberg) -- A slide in technology shares halted a three-day advance in US stocks as investors continued to recalibrate bets on the Federal Reserve’s path forward on interest rates. Treasuries drifted lower.

The Nasdaq 100 slumped 0.5% — paring a March advance to 4.7% — with tech stalwarts from Apple Inc. to Alphabet Inc. among the biggest drags. 

Tech stocks had found favor in recent weeks with the rotation out of financials following the collapse of three US banks. However, the trade has started to unwind with increased speculation turbulence in the banking sector will be contained. 

Two-year Treasury yields edged to just above 4%, while a gauge of the dollar notched its lowest close in eight weeks.

“Part of the giant bid in Treasuries last week was fear of contagion in financials,” said Tom Hearden, senior trader at Skylands Capital LLC. “That’s abated so far this week” with thin markets, off side positioning, and a financial contagion bid.

The moves come as investors prepare for a raft of data on the American economy this week, including the central bank’s preferred measure of inflation, which is likely to factor into the Fed’s next rate decision. 

St. Louis Fed President James Bullard said “appropriate monetary policy can continue to put downward pressure on inflation” despite the turmoil in banking. Meanwhile, US consumers appear to have shrugged off the bank failures, with the latest consumer confidence figures unexpectedly higher in March.

Swaps traders have priced in more than a 50% probability the Fed will lift rates by a quarter point at its next meeting, with plans to ease then sharply thereafter. However, several strategists have joined BlackRock Investment Institute in saying markets are wrong in expecting imminent rate cuts. 

“Recent events in the US and European banking sectors have not altered our macroeconomic views,” wrote Joe Davis, chief global economist at Vanguard, in a note. “The Federal Reserve still has work to do to bring down inflation — a task that was always going to be a challenge, likely to entail higher unemployment and tighten credit and financial conditions.”

In Europe, stocks fell after French prosecutors said banks including Societe Generale SA and BNP Paribas SA face collective fines of more than 1 billion euros ($1.1 billion) as part of a probe into tax fraud and money laundering.

Elsewhere, oil was higher after a clash between Iraq and its Kurdish region curtailed exports. Gold gained and Bitcoin traded around $27,400.

Key events this week:

• EIA Crude Oil Inventory Report, Wednesday
• Eurozone economic confidence, consumer confidence, Thursday
• US GDP, initial jobless claims, Thursday
• Boston Fed President Susan Collins and Richmond Fed President Thomas Barkin speaks at event. Treasury Secretary Janet Yellen also speaks, Thursday
• China PMI, Friday
• Eurozone CPI, unemployment, Friday
• US consumer income, PCE deflator, University of Michigan consumer sentiment, Friday
• ECB President Christine Lagarde speaks, Friday
• New York Fed President John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.5%
• The Dow Jones Industrial Average fell 0.1%
• The MSCI World index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%
• The euro rose 0.5% to $1.0847
• The British pound rose 0.5% to $1.2343
• The Japanese yen rose 0.6% to 130.80 per dollar

Cryptocurrencies

• Bitcoin rose 1.4% to $27,436.29
• Ether rose 4.7% to $1,787.59

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.55%
• Germany’s 10-year yield advanced six basis points to 2.29%
• Britain’s 10-year yield advanced nine basis points to 3.46%

Commodities

• West Texas Intermediate crude rose 0.8% to $73.40 a barrel
• Gold futures rose 1.1% to $1,992.80 an ounce

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