US stocks erased gains in choppy trading as investors assessed the outlook for corporate earnings and the path forward for central bank tightening.
(Bloomberg) — US stocks erased gains in choppy trading as investors assessed the outlook for corporate earnings and the path forward for central bank tightening.
The S&P 500 fell back below the 4,000 level, while the Nasdaq 100 slipped. Treasuries posted modest gains at the front end of the curve, with the policy sensitive two-year yield falling 4 basis points.
Goldman Sachs Group Inc. slid after reporting fourth-quarter net revenue below expectations, while Morgan Stanley rose as its wealth-management business boosted revenue above forecasts. Pfizer Inc. retreated after Wells Fargo & Co. predicted earnings downgrades for the drugs company.
Earnings may set the tone for traders this week as the reporting season moves up a gear. Of the 33 S&P 500 companies that have posted results so far, 25 have beaten analysts’ expectations. While it’s still early days in the season, the nascent trend lags buoyant surprises of earlier quarters. UBS Wealth Management expects “quite a bit of downside here on the earnings” in the US, according to Hartmut Issel, head of Asia Pacific equities.
Treasuries ticked higher along with gains in European sovereigns, with the 10-year bund yield dropping 10 basis points. The drop in yields suggesting traders are betting pressures on rate hikes are easing.
Read more: ECB Is Pondering Slower Hikes After Half Point in February
Goldman Sachs fell 2.6% after missing estimates. The results reflected lower net revenues in asset & wealth management as well as global banking & markets. Pfizer was 3.8% lower after Wells Fargo downgraded its recommendation on the stock. Morgan Stanley jumped 5%.
Several Federal Reserve officials will be speaking this week, providing more clues on their policy priorities. The World Economic Forum’s annual meeting kicks off in Davos, Switzerland, with speakers including ECB President Christine Lagarde and the International Monetary Fund’s Kristalina Georgieva.
The dollar traded lower after swinging between gains and losses at least 16 times on Tuesday. The greenback is trading near the lowest level since April, with China’s reopening bringing back the risk-on sentiment and sparking the best start to a year for global equities in records going back to 1988.
Elsewhere, oil contracts traded higher as traders weighed the chances of a revival in Chinese demand after the nation’s growth data was published.
Stocks trading in Hong Kong and mainland China closed in the red after China said its economic growth last year slowed as Covid restrictions hammered activity. But better-than-forecast fourth quarter and December data add to optimism it may be primed for a recovery.
Key events this week:
- Earnings to include: Charles Schwab, Discover Financial, Interactive Brokers, Investor AB, Netflix, Procter & Gamble, Prologis, State Street
- Fed’s John Williams to speak, Tuesday
- Euro-zone CPI, Wednesday
- US retail sales, PPI, industrial production, business inventories, MBA mortgage applications, cross-border investment, Wednesday
- Bank of Japan rate decision, Wednesday
- Federal Reserve releases Beige Book, Wednesday
- Fed speakers include Raphael Bostic, Lorie Logan and Patrick Harker, Wednesday
- US housing starts, initial jobless claims, Philadelphia Fed index, Thursday
- ECB account of its December policy meeting and President Christine Lagarde on a panel in Davos, Thursday
- Fed speakers include Susan Collins and John Williams, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- US existing home sales, Friday
- IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2% as of 10:43 a.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average fell 1%
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.2% to $1.0798
- The British pound rose 0.6% to $1.2264
- The Japanese yen was little changed at 128.55 per dollar
Cryptocurrencies
- Bitcoin fell 0.2% to $21,081.5
- Ether fell 0.9% to $1,565.66
Bonds
- The yield on 10-year Treasuries was little changed at 3.50%
- Germany’s 10-year yield declined nine basis points to 2.08%
- Britain’s 10-year yield declined two basis points to 3.36%
Commodities
- West Texas Intermediate crude rose 0.9% to $80.56 a barrel
- Gold futures fell 0.5% to $1,912.90 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar, Richard Henderson and Denitsa Tsekova.
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