Stocks dip from record highs with US inflation data on deck

by | Mar 11, 2024 | Business

By Chuck Mikolajczak

NEW YORK (Reuters) -A gauge of global stocks retreated for a second straight session on Monday, easing further from a record high ahead of U.S. inflation data this week which could heavily influence the Federal Reserve’s interest rate path.

Stocks have hit multiple record highs this year, but declined on Friday following a mixed U.S. payrolls report that did little to alter expectations for the Fed to begin cutting rates in June.

U.S. inflation data is due on Tuesday in the form of the consumer price index (CPI), with expectations for a monthly increase of 0.4% and 3.1% on an annual basis.

The Dow Jones Industrial Average rose 46.97 points, or 0.12%, to 38,769.66. The S&P 500 lost 5.74 points, or 0.11%, at 5,117.95 and the Nasdaq Composite fell 65.84 points, or 0.41%, to 16,019.27.

“There are two ways stocks can get hit here – in the very, very near-term you can get an upside surprise to CPI and you get further inversion of the yield curve and that just kind of punts the eventual reckoning down the street a few blocks,” said Brian Nick, senior investment strategist at The Macro Institute in New York.

“But what we’re more concerned about is that there’s emerging weakness in a lot of the current activity.”

U.S. Treasury yields edged up ahead of the data, with the benchmark U.S. 10-year notes up 1 basis point at 4.098%, from 4.088% late on Friday. The 2-year note yield, which typically moves in step with interest rate expectations, rose 5 basis points to 4.536%.

The Fed is scheduled to release its next policy statement on March 20 and investors have all but ruled out a cut, with expectations at 97% the Fed will hold rates steady, according to CME’s FedWatch Tool.

Last week, comments from Fed Chair Jerome Powell and European Central Bank policymakers buoyed expectations that rate cuts will begin this summer. Expectations for a cut of at least 25 basis points (bps) at the June meeting are currently above 70%.

MSCI’s gauge of stocks across the globe fell 2.55 points, or 0.33%, to 768.75.

The STOXX 600 index closed down 0.35%, while Europe’s broad FTSEurofirst 300 index ended down 6.47 points, or 0.32%, weighed down by technology sector declines.

The dollar index gained 0.17% at 102.85, with the euro down 0.12% at $1.0924. Sterling weakened 0.37% at $1.281.

The Japanese yen <JPY= > strengthened 0.09% against the greenback at 146.94 per dollar. The yen had strengthened earlier in the day after Reuters reported a growing number of Bank of Japan policymakers are warming to the idea of ending negative interest rates this month.

In addition, data released on Monday showed Japan was not in recession after economic growth was revised up to an annualized 0.4% for the December quarter.

Crude prices were mixed, as U.S. crude settled down 0.1% at $77.93 a barrel and Brent settled at $82.21 per barrel, up 0.16% to on the day as concerns eased that fighting in the Middle East would disrupt supply and Chinese data suggested weak demand, while an increase in U.S. refining limited any selling.

In cryptocurrencies, bitcoin gained 5.37% at $72,090.50 after hitting a record $72,901.94.

(Reporting by Chuck Mikolajczak, Editing by Angus MacSwan, Christina Fincher and Richard Chang)




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