NEW YORK, April 18 — A gauge of global stocks was slightly higher yesterday as investors digested another round of corporate earnings, while the dollar and US Treasuries yields rose after economic data further cemented expectations of a rate hike from the Federal Reserve in May.
After the first wave of bank earnings last week from names such as JP Morgan and Wells Fargo were better than anticipated, investors will now see results from the likes of Goldman Sachs, Morgan Stanley, Bank of America and a host of regional banks.
Other notable S&P 500 companies scheduled to report earnings this week include Johnson & Johnson, Netflix and Tesla.
On Wall Street, stocks staged a modest rally late in the session to close near their highs of the day, but held within a tight trading range. State Street, however, plunged 9.18 per cent, its biggest daily percentage decline since March 2020, after posting quarterly results.
“The market is always sort of stuck in neutral around the early part of earnings season because nobody quite knows what to expect — is a company going to positively surprise or negatively surprise, we just don’t know,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, New York.
“The other thing out there of course is the Fed, now the expectation is for a 25 basis-point hike in May. We are obviously very close to the end of Fed rate hikes, that doesn’t mean rates are coming down, that is why you are seeing the short end of the curve back up here in terms of yield.”
The Dow Jones Industrial Average rose 100.71 points, or 0.3 per cent, to 33,987.18, the S&P 500 gained 13.68 points, or 0.33 per cent, to 4,151.32 and the Nasdaq Composite added 34.26 points, or 0.28 per cent, to 12,157.72.
In Europe, stocks ended just barely lower to snap a five-session streak of gains, with the pan-European STOXX 600 index down 0.01 per cent. The winning streak was the longest for the index in three months.
MSCI’s gauge of stocks across the globe gained 0.10 per cent.
US yields climbed and the dollar strengthened, buoyed in part by economic data that showed a rebound in New York factory activity, while confidence among US single-family homebuilders improved for a fourth straight month in April. The data helped to fuel growing expectations the Fed will raise rates by 25 basis points at its May meeting.
While many see the Federal Reserve as closer to ending its rate hike cycle than other global central banks, economic data has indicated the economy is not near a recession yet, giving the Fed leeway to continue with rate hikes.
Market expectations for a 25 basis-point hike at the May meeting have risen to more than 86 per cent, up from the 78 per cent on Friday, according to CME’s FedWatch Tool.
The yield on 10-year Treasury notes was up 8 basis points to 3.602 per cent.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was up 9.3 basis points at 4.196 per cent.
The dollar index rose 0.413 per cent, with the euro down 0.66 per cent at US$1.0926.
The Japanese yen weakened 0.51 per cent versus the greenback at 134.47 per dollar, while Sterling GBP= was last trading at US$1.2376, down 0.30 per cent on the day. The greenback hit a one-month high against the yen as the Bank of Japan is widely expected to keep a loose monetary policy.
A bevy of Fed officials are scheduled to speak this week, as investors have a heightened focus on their comments ahead of the blackout period that begins on April 22 ahead of the central bank’s May 2-3 meeting.
The dollar strength and rate hike concerns weighed on crude prices, as US crude settled down 2.1 per cent at US$80.83 per barrel and Brent settled at US$84.76, down 1.8 per cent on the day. — Reuters
