(Bloomberg) – Wall Street’s selloff in stocks showed signs of easing, even as investors grappled with longer-term interest rates and the threat of an Israeli counterattack.
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U.S. stock futures rose, signaling a recovery after the S&P 500 fell more than 1% in the past two sessions. Two-year bonds are now close to 5%. The dollar rose for the fifth straight day, the longest since January.
While economic data continues to highlight the strength of the U.S. economy, conflicts in the Middle East are fueling the risk of rising energy prices and inflation, undermining hopes for an imminent Federal Reserve rate cut. As earnings season begins, there are growing concerns that mega-cap leaders will struggle to justify their lofty valuations.
“Markets are looking for an excuse to breathe,” said Florian Hierpo, head of macro research at Lombard Odier Asset Management. We are providing it.”
While traders are no longer fully pricing in a Fed rate cut before November, strategists at UBS Group AG say there may be no change in direction at all and that U.S. policymakers will instead embark on a rate hike cycle. I warned you. The yield on the 10-year U.S. Treasury note has risen more than 10 basis points since the beginning of the week to 4.65%.
The dollar strengthened as investors piled money into safe-haven assets as stocks and bonds came under pressure. Israeli military leaders have vowed to respond to Iranian missile attacks despite diplomatic calls for restraint.
Daniel Loney, head of fixed income at Mediolanum International Fund, said the recent data “forced the Fed to rethink things a little bit and the market repriced significantly.” “There are powerful dynamics where U.S. growth and inflation trends intermingle with major commodity and supply chain-related inflationary pressures.”
Meanwhile, stocks outside the US were trading in the red, with European stocks down 1.2% and Asian stocks down 2%.
This year’s record rally has made the market particularly vulnerable to a pullback, according to top Wall Street strategists.
Investors’ allocations to stocks are at their highest in two years, according to a Bank of America survey. Citigroup strategists counted $52 billion in long positions in the S&P 500 index, 88% of which were losses.
“If the market turns negative, the move could be faster and larger because there are large long positions that are already in the red,” Citigroup strategist Chris Montague said in a note. said.
Read more: Wall Street strategists say falling stock prices pose risk of forced selling
Among individual investors, Tesla Inc. fell as much as 2.6% in pre-market trading after two executives from the electric car maker resigned in the largest-ever layoff. Morgan Stanley rose 3% earlier after reporting first-quarter wealth management net revenue that beat the average analyst estimate. Equity trading revenue also exceeded consensus.
This week’s main events:
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US housing starts, industrial production, Tuesday
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Fed Vice Chairman Philip Jefferson speaks on Tuesday
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BOE Governor Andrew Bailey speaks on Tuesday
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IMF releases latest global economic outlook on Tuesday
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Eurozone CPI, Wednesday
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Fed issues beige book on Wednesday
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Cleveland Fed President Loretta Mester speaks Wednesday
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Federal Reserve President Michelle Bowman speaks on Wednesday
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BOE Governor Andrew Bailey speaks on Wednesday
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Taiwan Semiconductor’s financial results, Thursday
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US conference board leading index, number of existing homes sold, number of new unemployment insurance claims, Thursday
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Fed Director Michelle Bowman speaks Thursday
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New York Fed President John Williams speaks Thursday
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Atlanta Fed President Rafael Bostic speaks Thursday
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BOE Deputy Governor Dave Lumsden and ECB Board Member Joachim Nagel speak on Friday
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Chicago Fed President Austan Goolsby speaks on Friday
The main movements in the market are:
stock
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As of 8:22 a.m. New York time, S&P 500 futures were up 0.1%.
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Nasdaq 100 futures little changed
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Dow Jones Industrial Average futures rose 0.5%
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Stoxx European 600 falls 1.2%
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MSCI World Index falls 0.5%
currency
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Bloomberg Dollar Spot Index rose 0.1%
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The euro rose 0.2% to $1.0642.
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The British pound was almost unchanged at $1.2454.
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The Japanese yen fell 0.2% to 154.64 yen to the dollar.
cryptocurrency
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Bitcoin fell 0.3% to $62,976.73.
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Ether fell 0.3% to $3,073.92.
bond
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The 10-year Treasury yield rose 5 basis points to 4.65%.
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Germany’s 10-year bond yield rose 2 basis points to 2.46%.
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The UK 10-year bond yield rose 5 basis points to 4.29%.
merchandise
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West Texas Intermediate crude oil fell 0.6% to $84.93 a barrel.
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Spot gold fell 0.5% to $2,370.55 an ounce.
This article was produced in partnership with Bloomberg Automation.
–With assistance from Allegra Catelli, Sagarika Jaisinghani, Farah Elbahrawy, Guy Johnson, Sujata Rao, and Chiranjivi Chakraborty.
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