Stocks Waver, Bonds Gain With Focus on Policy: Markets Wrap

(Bloomberg) -- Stocks wavered while bonds gained, with traders assessing comments from major central bank chiefs for clues on the outlook for policy and the global economy.

The S&P 500 edged higher after briefly trading below the 3,815 Fibonacci 38.2% retracement level that investors have been closely watching. Quarterly rebalancing of portfolios contributed to the equity-market choppiness. The greenback advanced against most major currencies. Treasury 10-year yields hovered near 3.15%.

Federal Reserve Chair Jerome Powell said the US economy is in “strong shape” and “well positioned to withstand tighter monetary policy.” He reiterated Wednesday that the Fed is raising rates “expeditiously” and aims to move “into restrictive territory fairly quickly,” referring to having borrowing costs at levels that would restrain rather than spur economic growth. Powell spoke on a panel with European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey.

Earlier in the day, Fed Bank of Cleveland President Loretta Mester said officials must not be complacent about increases in long-term inflation expectations and should act forcefully to curb rising price pressures. US consumer spending expanded in the first quarter at the softest pace of the pandemic recovery, marking a surprise sharp downward revision that suggests an economy on weaker footing than previously thought. The Fed was in denial about inflation and moved too slowly in trying to quell rising prices. That’s now put it on a trajectory to create a recession, if it hasn’t already done so, according to Rob Arnott at Research Affiliates.

“We do not believe the stock market has bottomed yet, and we see further downside ahead,” said George Ball, chairman of Sanders Morris Harris. “Investors should be holding elevated levels of cash right now. Stocks with high dividend yields and low volatility are a sound investment while we wait for the markets to bottom.”

Chief financial officers are growing increasingly downbeat about the economy this year, with a measure of sentiment falling to the lowest in nearly a decade. Respondents reduced their expectations for economic growth, according to the latest quarterly results of The CFO Survey, a collaboration of Duke University’s Fuqua School of Business and the Fed Banks of Richmond and Atlanta. The survey’s optimism index fell to 50.7, the weakest since the end of 2012.

In corporate news, General Mills Inc., the maker of Cheerios cereal, climbed after saying price increases and easing supply-chain disruptions will buoy sales. Carnival Plc slumped as Morgan Stanley warned that the cruise vacation firm’s shares could lose all their value in the event of another demand shock. Bed Bath & Beyond Inc. plunged as the home-goods retailer reported disappointing results.

What to watch this week:

• China PMI, Thursday
• US personal income, PCE deflator, initial jobless claims, Thursday
• Eurozone CPI, Friday
• US construction spending, ISM Manufacturing, Friday

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Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.1% as of 10:25 a.m. New York time
• The Nasdaq 100 rose 0.2%
• The Dow Jones Industrial Average rose 0.4%
• The Stoxx Europe 600 fell 0.7%
• The MSCI World index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.4% to $1.0480
• The British pound fell 0.5% to $1.2117
• The Japanese yen fell 0.5% to 136.87 per dollar

Bonds

• The yield on 10-year Treasuries declined five basis points to 3.13%
• Germany’s 10-year yield declined nine basis points to 1.54%
• Britain’s 10-year yield declined seven basis points to 2.40%

Commodities

• West Texas Intermediate crude rose 1.9% to $113.88 a barrel
• Gold futures fell 0.1% to $1,819 an ounce

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