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Saturday, Apr 20, 2024

US stocks sink deeper as markets tumble worldwide

US stocks sink deeper as markets tumble worldwide

Investors are increasingly worried about inflation, a war in Ukraine and China’s COVID-19 lockdowns.

Stocks tumbled to a 13-month low in a widespread selloff amid concern about the Federal Reserve’s ability to tame inflationary spirals without throwing the economy into a recession.

The slide in the S&P 500 topped 3%, while the Treasury curve steepened, with the gap between five- and 30-year rates hitting the widest since March. Investors are increasingly worried about the limits to Fed policy at a time when supply-chain disruptions pose a significant threat to inflation amid a ravaging war in Ukraine and China’s Covid lockdowns. Data Monday showed U.S. consumers project prices in three years to be higher compared with a month ago — a troubling sign for officials trying to keep longer-term expectations anchored.

Pandemic-era stars bore the brunt of the selling, with Cathie Wood’s flagship exchange-traded fund sinking about 10% and an ETF tracking newly public companies down the most since the onset of the pandemic. Bitcoin slipped below $32,000, falling more than 50% from its all-time high. The rout also spread to energy producers, easily the market’s strongest sector in 2022. The group plunged over 8% as crude slid. Big tech was not spared, with the likes of Tesla Inc., Amazon.com Inc. and Nvidia Corp. off by at least 5%. The Cboe Volatility Index spiked to its highest in two months.

Traders will be closely watching a host of central bank speakers this week after Chair Jerome Powell on Wednesday played down the option of 75 basis-point rate hike. Fed Bank of Atlanta President Raphael Bostic told Bloomberg Television he favors policy makers continuing to raise rates by half-point increments rather than doing anything larger. In a later interview with Reuters broadcast on Twitter, Bostic added that while he saw low odds for a 75-basis-point hike in the next several months, he’s “not taking anything off the table.”

The April consumer-price index report on Wednesday is the highlight of an otherwise quiet week for economic releases. Inflation is projected to have moderated on both a monthly and annual basis, partly reflecting a dip in gasoline prices that have since picked back up. While inflation likely peaked in March at 8.5%, the hottest in four decades, price pressures are expected to remain elevated, keeping Fed officials on track to steadily lift borrowing costs in the months ahead.

High inflation readings, a slowing economy and aggressive tightening by the Fed to rein in soaring prices have weighed on risk appetite and valuations. Even if an outright recession is avoided, the outlook for U.S. stocks isn’t particularly bright, according to Goldman Sachs Group Inc. strategists.

“Swings will remain large until the path of inflation is clarified,” strategists led by David Kostin wrote in a note to clients, adding that “tightening financial conditions and poor market liquidity make it difficult to argue for a short-term rally similar in size to the one in late March.”

Here are key events to watch this week:


*  Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic, New York Fed President John Williams, Fed Governor Christopher Waller speak, Tuesday

*  Atlanta Fed President Raphael Bostic speaks, Wednesday

*  U.S. CPI, WednesdayEIA crude oil inventory report, Wednesday

*  San Francisco Fed President Mary Daly speaks, Thursday

*  U.S. PPI, initial jobless claims, Thursday

*  University of Michigan consumer sentiment, Friday

Some of the main moves in markets:


Stocks

*  The S&P 500 fell 3.2% as of 4 p.m. New York time

*  The Nasdaq 100 fell 4%

*  The Dow Jones Industrial Average fell 2%

*  The MSCI World index fell 3.1%

Currencies

*  The Bloomberg Dollar Spot Index rose 0.3%

*  The euro was little changed at $1.0559

*  The British pound fell 0.1% to $1.2333

*  The Japanese yen rose 0.3% to 130.22 per dollar

Bonds

*  The yield on 10-year Treasuries declined 10 basis points to 3.03%

*  Germany’s 10-year yield declined four basis points to 1.09%

*  Britain’s 10-year yield declined four basis points to 1.96%

Commodities

*  West Texas Intermediate crude fell 6.8% to $102.28 a barrel

*  Gold futures fell 1.6% to $1,852.70 an ounce

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