Updated at 4:10 pm EST
Stocks edged lower Monday, while the dollar extended gains against its global peers, as investors looked to form a path between the impact of rising Treasury yields and a hawkish Federal Reserve against the potential for a near-term boost from the first quarter earnings season.
The Dow Jones Industrial Average finished down 39 points, or 0.11%, to 34,411, while the S&P 500, which is down 3.04% for the month, dipped 0.02%. The tech-focused Nasdaq was marked 0.14% lower as a benchmark 2-year note yields climbed to 2.47%.
The Fed’s signaling on rates, which will likely deliver another seven or eight rate hikes this year, has boosted the odds of a near-term recession to around 35%, Goldman Sachs has cautioned, as policymakers fight imbedded inflation pressures in the world’s biggest economy. .
Last week’s reading of retail sales growth for the month of March suggested that both soaring inflation, as well as record high gas prices, trimmed discretionary spending power and could add to signals of a slowdown in the broader economy in the months ahead.
Still, with earnings season moving into full swing, there remains plenty of chances for stocks to find their footing over the coming weeks, particularly if Treasury yields stall. Benchmark 10-year note yields, however, are back close to their 2019 peaks in overnight trading, at 2,866% but are firmly 38 basis points higher than 2-year notes, suggest bond traders aren’t as concerned over recession risks as they were a few weeks ago.
Collective S&P 500 profits are expected to rise 6.3% from last year to $ 408.3 billion over the first quarter, according to Refinitiv data, before improving only modestly to a growth rate of 6.4% over the three months ending in June.
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This week’s parade includes after-the-bell updates from Netflix (NFLX) – Get Netflix, Inc. Report on Tuesday, Tesla (TSLA) – Get Tesla Inc Report on Wednesday as well as pre-market releases from bluechips such as Johnson & Johnson (JNJ) – Get Johnson & Johnson ReportProcter & Gamble (PG) – Get Procter & Gamble Company ReportAT&T (T) – Get AT&T Inc. ReportVerizon (VZ) – Get Verizon Communications Inc. Report and American Express (AXP) – Get American Express Company Report.
Beyond earnings, investors will also be closing tracking data from the housing market, which is suffering from both a lack of new inventory and the first bump for mortgage rates over the 5% market in nearly a decade.
The Commerce Department will publish March housing starts data on Tuesday, with the National Association of Realtors following-up with existing home sales on Wednesday.
Risk aversion, however, is spreading through asset markets around the world, with bitcoin prices falling to a one-month low of $ 38,580 in overnight trading, pulling the value of global crypto currencies below $ 2 trillion, and the dollar index rising another 0.5% against a basket of six global currencies to a two-year high of 100.84, and a twenty year high of 126.88 against the Japanese yen.
The dollar’s gain pulled global oil prices modestly lower in overnight trading, but WTI crude futures gained $ 1.32 to trade $ 108.26 per barrel even after data from China showed March refinery runs fell 2% from last year as demand waned amid the country’s ongoing Covid lockdown.
Twitter (TWTR) – Get Twitter, Inc. Report shares finished up 7.6% as investors bet that Tesla’s (TSLA) – Get Tesla Inc Report billionaire CEO Elon Musk will take his $ 42 billion takeover bid directly to shareholders if the board decides to reject it.
Bank of America (BAC) – Get Bank of America Corp Report shares were also on the rise, finishing up 3.2%, after it posted better-than-expected first quarter earnings thanks in part to solid gains in net interest income amid improving loan demand and a $ 240 billion gain for the bank’s deposit base.
Tesla shares gained 2% higher amid reports that the carmaker is ready to re-start production at its Shanghai gigafactory following a three-week shutdown triggered by China’s ongoing Covid crisis.
In overseas markets, European and UK stocks were closed on the final day of the region’s four-day Easter celebrations while stocks in Asia fell 0.7%, based on the MSCI ex-Japan benchmark, as weaker economic activity data from China over the month of March, including a 3.5% contraction in retail sales and the highest unemployment rate in two years, offset a modestly firmer-than-expected 4.8% GDP growth rate for the first quarter.