NEW YORK, May 11 — Wall Street closed higher yesterday as investors waited for inflation data and worried about the prospects of slowing economic growth and the impact of policy tightening.
US Treasuries rallied, with the yield on the benchmark 10-year note tumbling from a more than three-year high to below 3 per cent as investors reassessed the inflation outlook before US consumer price index (CPI) data is released today.
US crude oil futures dipped below US$100 (RM438.20) a barrel to their lowest level in two weeks as the demand outlook was clouded by coronavirus lockdowns in China and growing recession concerns, while a strong dollar made crude more expensive for buyers using other currencies.
Markets have been volatile across asset classes due to a combination of surging inflation and fears that monetary tightening aimed at slowing price increases would cause a slowdown in global economic growth.
Last week, central banks in the United States, Britain and Australia raised interest rates and investors girded for more tightening as policymakers fought soaring inflation.
After turning red for a few hours earlier in the session, the S&P closed up slightly while Nasdaq added almost 1 per cent. Technology, the market’s biggest growth sector, was leading gains as investors reacted to falling bond yields and bounced back after a furious sell-off on Monday.
“If we’ve seen the worst of the rate of change from long-term interest rates, it may create room for equities to do a little bit better,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.
The Dow Jones Industrial Average fell 84.96 points, or 0.26 per cent, to 32,160.74, the S&P 500 gained 9.81 points, or 0.25 per cent, to 4,001.05 and the Nasdaq Composite added 114.42 points, or 0.98 per cent, to 11,737.67.
MSCI’s gauge of stocks across the globe gained 0.08 per cent.
Matthew Miskin, co-chief investment strategist at John Hancock Investment Management, was reassured by policy makers including Cleveland Federal Reserve Bank President Loretta Mester. While Mester said unemployment may increase and growth may slow, she added that tightening should not cause a “sustained downturn.”
“They’ve been so hawkish so any slight move off that the market wants to sniff that out,” said Miskin. “Sentiment wise, a lot of people are looking for capitulation. The dots aren’t completely connecting yet for that.”
The US dollar was choppy yesterday but held near a two-decade high ahead of the hotly anticipated inflation data which could provide insight on the Fed policy path.
The dollar index, which measures the greenback against a basket of other major currencies, was last up 0.193 per cent, with the euro down 0.24 per cent to US$1.053.
“It’s the calm before inflation data tomorrow, so this is allowing a breather for risky assets,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC with trader positioning that was “working in the favour of risk assets.”
The Japanese yen weakened 0.10 per cent versus the greenback at 130.40 per dollar, while Sterling was last trading at US$1.2314, down 0.14 per cent on the day.
Oil prices fell in volatile trade as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks.
US crude recently fell 3.35 per cent to US$99.64 per barrel and Brent was at US$102.26, down 3.47 per cent on the day.
Earlier data showed China’s export growth slowed to its weakest in almost two years, as the central bank pledged to step up support for the slowing economy.
Benchmark 10-year notes last rose 22/32 in price to yield 2.9947 per cent, down from 3.079 per cent late on Monday.
“It’s a risk recalibration. There’s no other catalyst, other than it’s gone too far, too fast,” George Goncalves, head of US macro strategy at MUFG Securities said, referring to yields. “Maybe we’re going to get a period of inflation that won’t be just heading higher unabatedly.”
Spot gold dropped 1.0 per cent to US$1,835.86 an ounce as investors eyed the rising dollar and waited for today’s inflation data.
Elsewhere, bitcoin was up 3.7 per cent after earlier falling to its lowest level since July 2021. Yesterday’s gain recovered some losses from its 11.8 per cent plunge on Monday. — Reuters