US stocks were little changed and Treasuries edged lower as uncertainty over the path of the Federal Reserve’s interest-rate hikes continued to plague markets in the wake of three US bank collapses.
(Bloomberg) — US stocks were little changed and Treasuries edged lower as uncertainty over the path of the Federal Reserve’s interest-rate hikes continued to plague markets in the wake of three US bank collapses.
St. Louis Fed President James Bullard said “appropriate monetary policy can continue to put downward pressure on inflation” despite the turmoil. Meanwhile, US consumers appear to have shrugged off the bank failures, with the latest consumer confidence figures unexpectedly higher.
The S&P 500 drifted lower, snapping a three-day advance, while the two-year Treasury yield held just above 4%.
“Investors can’t seem to make up their minds as to where stocks should go from here, how the bank crisis will play out, and whether the FOMC’s next move will be a rate hike, a rate pause, or a rate cut,” said Bespoke Investment Group cofounder Paul Hickey.
Swaps traders have priced in more than a 50% probability that the Federal Reserve will lift rates by a quarter point at its next gathering and then ease 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 tighter credit and financial conditions.”
Investors will get a raft of data on the American economy this week, including on the central bank’s preferred measure of inflation, on top of testimony from Fed officials on the collapse of regional banks.
US banks are expected to see a lift from the Senate Banking Committee’s first Congressional hearing on the collapse of both Silicon Valley Bank and Signature Bank, though shares of First Republic Bank were little changed after Monday’s advance.
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 was higher and Bitcoin traded around $27,000.
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 was little changed as of 11:40 a.m. New York time
- The Nasdaq 100 fell 0.6%
- The Dow Jones Industrial Average rose 0.3%
- The Stoxx Europe 600 was little changed
- The MSCI World index rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.4% to $1.0844
- The British pound rose 0.5% to $1.2348
- The Japanese yen rose 0.5% to 130.91 per dollar
Cryptocurrencies
- Bitcoin was little changed at $27,071.65
- Ether rose 2.2% to $1,746.2
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 eight basis points to 3.45%
Commodities
- West Texas Intermediate crude rose 0.9% to $73.50 a barrel
- Gold futures rose 0.8% to $1,986.40 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Namitha Jagadeesh.
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