Stocks Rebound as Tech Rises, Dollar Pares Gain: Markets Wrap

(Bloomberg) -- US stocks turned higher as 10-year Treasury yields held below 3%. The dollar erased gains.

The S&P 500 bounced higher after falling as much as 1%. The Nasdaq 100 rebounded amid gains in Apple Inc. and Microsoft Corp. Consumer discretionary stocks declined, with Target Corp. falling after the retailer cut its profit outlook for the second time in three weeks amid an inventory surplus. 

The reversal in sentiment comes as investors weigh prospects for growth as the Federal Reserve hikes rates to contain runaway inflation. Uncertainty about the outlook has led to a back and forth between stocks and bonds ahead of US inflation data later this week.

“The yield on the 10-year note fell back below 3%, so it seems like the stock market is very focused on the Treasury market this week,” said Matt Maley, chief market strategist for Miller Tabak + Co. “I’m not so sure that the 3% level is as important as the stock market does this week, but with no Fed speak this week and the CPI number not due out until Friday, we could see stocks whip around in both directions for a few days.”

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Treasuries rose, with five- and 10-year yields trading below 3% as investors await crucial inflation data on Friday. The US consumer price index reading for May will help color in the picture for traders trying to discern the Fed’s rate path and whether it will continue to hike in 50-basis point increments. Strong hiring data last week provided some justification for an aggressive approach.

“We likely need to see a dovish pivot from policymakers to really have conviction that we’re going to a sustained rally in equities,” Laura Cooper, a senior investment strategist at BlackRock Inc., said in an interview with Bloomberg TV. “This debate around ‘are we going to see a recession, are we going to see a soft landing?’ -- that’s really keeping markets relatively range-bound.”

Earlier, the Reserve Bank of Australia blindsided the market with an outsized hike to combat rising costs. The RBA responded to price pressures with its biggest rate increase in 22 years -- predicted by just three of 29 economists -- and indicated it remained committed to “doing what is necessary” to rein in inflationary pressures. 

The European Central Bank on Thursday is set to end trillions of euros of asset purchases and cement a path to exiting eight years of negative interest rates.

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Key events to watch this week:

• Reserve Bank of India rate decision Wednesday
• OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years. Wednesday
• European Central Bank rate decision, Christine Lagarde briefing, Thursday
• China trade, new yuan loans, money supply, aggregate financing. Thursday
• US CPI, University of Michigan consumer sentiment Friday
• China CPI, PPI Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.3% as of 11:04 a.m. New York time
• The Nasdaq 100 rose 0.5%
• The Dow Jones Industrial Average rose 0.1%
• The Stoxx Europe 600 fell 0.3%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0706
• The British pound rose 0.4% to $1.2579
• The Japanese yen fell 0.4% to 132.42 per dollar

Bonds

• The yield on 10-year Treasuries declined seven basis points to 2.97%
• Germany’s 10-year yield declined four basis points to 1.28%
• Britain’s 10-year yield declined four basis points to 2.21%

Commodities

• West Texas Intermediate crude rose 0.8% to $119.44 a barrel
• Gold futures rose 0.6% to $1,854.20 an ounce

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