Stocks Push Lower on Rate Woes; Treasures Slump: Markets Wrap

(Bloomberg) — US stocks continued to decline and Treasures dropped as traders assessed the Federal Reserve’s path next year after central bank officials vowed to keep raising rates until they’re confident inflation has been subdued.Most Read from BloombergThe S&P 500 fell as much as 1.4% and the tech-heavy Nasdaq 100 declined as much as 1.7%. Declines in the shares of Microsoft Corp., Apple Inc. and Inc. weighed on both indexes. An initial rally in Tesla Inc. Shares following Elon Musk’s suggestion that he may step back from Twitter Inc. faded. Treasures fell, led by longer-dated securities as traders speculated about the potential for a hawkish pivot from the Bank of Japan. Investors are still on the edge after recent remarks from the Fed and other hawkish central banks across the globe. Sentiment remained sour after former New York Fed President and Bloomberg Opinion columnist William Dudley told Bloomberg Television on Monday that optimistic markets could only make the central bank tighten even more. European Central Bank Governing Council Member and Bundesbank President Joachim Nagel saying it will take some time until inflation slows to the central bank’s 2% target also dampened the mood on Monday.”Those who were in the camp of a year-end rally are now second -guessing their investment thesis,” wrote JC O’Hara, chief market technician at MKM Partners. “The markets may have placed a little too much faith in Santa Claus and the rally he typically brings.”But some investors are looking past fears of an economic recession triggered by higher interest rates, and are betting instead that inflation might be peaking, which would allow the Fed and its peers some leeway in their tightening policy. Story continues“I’m kind of more in the camp of they hike in February, and I do think they’ll hike again in March, but that’s probably it.” Matt Brill, head of US investment grade and senior portfolio manager at Invesco, said on Bloomberg Television. We’re 90%-95% of the way done here. I think the floor has sort of been set and the worst is certainly behind us.”Meanwhile, US homebuilder sentiment sank in December to a level not seen in over a decade outside of the pandemic, amid high mortgage rates and construction costs.The dollar wavered as investors weighed the Fed’s rate outlook ahead of fresh economic data this week. The euro strengthened, following a string of hawkish comments from rate-setters. Earlier, global equity investors were somewhat heartened by a vow from China’s top leaders to boost the economy next year by reviving consumption and supporting the private sector. Oil climbed.Key events this week:China loan prime rates, TuesdayBank of Japan interest rate decision, TuesdayUS housing starts, TuesdayEIA Crude Oil Inventory Report, WednesdayUS existing home sales, US Conference Board consumer confidence, WednesdayUS GDP, initial jobless claims, US Conf . Board leading index, ThursdayUS consumer income, new home sales, US durable goods, PCE deflator, University of Michigan consumer sentiment, FridaySome of the main moves in markets:StocksThe S&P 500 fell 1.3% as of 2:52pm New York timeThe Nasdaq 100 fell 1.7%The Dow Jones Industrial Average fell 1%The MSCI World index fell 1.1%CurrenciesThe Bloomberg Dollar Spot Index was little changedThe euro rose 0.2% to $1.0603The British pound was little changed at $1.2143The Japanese yen fell 0.3% to 136.95 per dollarCryptocurrenciesBitcoin fell 1.2% to $16,548.07Ether fell 1% to $1,170.74BondsThe yield on 10-year Treasures advanced 10 basis points to 3.58%Germany’s 10-year yield advanced five basis points to 2.20%Britain’s 10-year yield advanced 17 basis points to 3.50%CommoditiesWest Texas Intermediate crude rose 1.3% to $75.25 a barrel Gold futures fell 0.2% to $1,796 an ounceThis story was produced with the assistance of Bloomberg Automation.–With assistance from Vildana Hajric and Sujata Ra o.Most Read from Bloomberg Businessweek©2022 Bloomberg LP

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