US stocks decline on growth concerns

The risk of an economic downturn amid price pressures and rising borrowing costs remains the major worry for markets.

By Bloomberg

Stocks declined in early New York trading as investors assessed the latest signs of economic malaise from the US and China amid speculation about the Federal Reserve’s rate-hike trajectory.

Both the S&P 500 and and tech-heavy Nasdaq 100 retreated. Data Monday showed New York state manufacturing activity unexpectedly contracted in May for the second time in three months, stoking concerns of slowing economic activity that may complicate the Fed’s policy path. Treasury yields dipped along with the dollar.

The New York Fed’s data are the first of several regional Fed manufacturing numbers set for release over the coming weeks. Similarly disappointing figures may temper bets on a steep rate-hike cycle as the Fed battles inflation. Meanwhile, China’s industrial output and consumer spending hit the worst levels since the pandemic began, hurt by Covid lockdowns.

S&P 500 has further downside before testing crucial 200-week moving average

The risk of an economic downturn amid price pressures and rising borrowing costs remains the major worry for markets. Goldman Sachs Group Inc. Senior Chairman Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.” Traders remain wary of calling a bottom for equities despite a 17% drop in global shares this year, with Morgan Stanley warning that any bounce in US stocks would be a bear-market rally and more declines lie ahead.

“Trying to time the market is likely to prove time-consuming and loss-making,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Investor sentiment is fickle, and markets are likely to remain choppy until we get greater clarity on the three Rs: rates, recession, and risk.”

Cryptocurrencies dipped as the mood in stocks weakened. That took Bitcoin back to around the $30,000 level.

Energy Costs

Food and fuel prices are feeding into rising costs. Wheat jumped by the exchange limit on India’s move to curb exports while oil was held around $110 a barrel. Shanghai is close to the necessary threshold for loosening its six-week lockdown, a development that could spur bets on rising energy demand.

Meanwhile, the European Commission warned the euro area’s pandemic recovery would almost grind to a halt, while prices would surge even more quickly if there are serious disruptions to natural-gas supplies from Russia. Traders are also watching efforts by Finland and Sweden to join the North Atlantic Treaty Organization in the wake of Russia’s invasion of Ukraine.

What to watch this week:

  • Fed Chair Jerome Powell among slate of Fed speakers Tuesday
  • Reserve Bank of Australia releases minutes of its May policy meeting Tuesday
  • G-7 finance ministers and central bankers meeting Wednesday
  • Eurozone, UK CPI Wednesday
  • Philadelphia Fed President Patrick Harker speaks Wednesday
  • China loan prime rates Friday

Some of the main moves in markets:

Stocks

  • The S&P 500 fell 0.4% as of 9:30 a.m. New York time
  • The Nasdaq 100 fell 0.8%
  • The Dow Jones Industrial Average fell 0.2%
  • The Stoxx Europe 600 fell 0.2%
  • The MSCI World index fell 0.2%

Currencies

  • The Bloomberg Dollar Spot Index was little changed
  • The euro was little changed at $1.0418
  • The British pound fell 0.1% to $1.2245
  • The Japanese yen was little changed at 129.18 per dollar

Bonds

  • The yield on 10-year Treasuries declined two basis points to 2.90%
  • Germany’s 10-year yield advanced three basis points to 0.98%
  • Britain’s 10-year yield advanced two basis points to 1.77%

Commodities

  • West Texas Intermediate crude fell 0.4% to $110.05 a barrel
  • Gold futures fell 0.2% to $1,804.90 an ounce

–With assistance from Michael Msika and Andreea Papuc.

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