U.S. stocks edged higher in early trading and Treasuries steadied on Monday as investors weighed prospects for faster policy tightening by the Federal Reserve.
The S&P 500 added 0.2% while the tech-heavy Nasdaq 100 was little changed. A cautious overall investor mood bolstered the dollar and gold.
Treasury yields fluctuated as investors look forward to speeches by Fed policy makers this week for new clues on whether it will raise interest rates by a half point in May to curb price pressures. A jump in energy costs highlighted inflation concerns, as U.S. natural gas prices surged to the highest intraday level in more than 13 years.
Investors also focused on earnings and guidance. Bank of America Corp. joined a string of beats by big lenders such as Morgan Stanley and Citigroup Inc. Its shares ticked higher in early trading.
In other market moves, Twitter Inc. rose after Elon Musk said the economic interests of the board are not aligned with shareholders. DiDi Global Inc. plummeted after saying it will hold an extraordinary general meeting to vote on delisting its shares from the New York Stock Exchange.
The pattern across markets suggests investors remain uncertain whether high inflation has peaked or not. Price pressures are being fanned by supply-chain snarls from China’s Covid restrictions and disruptions to commodity flows due to the war. Concern is growing that the U.S. economy faces a downturn as the Fed pivots toward aggressive policy tightening to contain the cost of living.
History suggests the Fed will face a difficult task in tightening policy to cool inflation without causing a U.S. recession, according to Goldman Sachs Group Inc. It put the odds of a contraction at about 35% over the next two years.
The positive effects from inflation on earnings growth for U.S. firms have peaked as rising costs trim their margins and price pressures caused by the Ukraine war hit consumers, according to Morgan Stanley strategists.
Chinese economic data were mixed, adding to investor concerns about its stalled recovery. China cut the reserve requirement ratio on Friday but refrained from lowering interest rates in a cautious approach to policy easing, while Bank of Japan Governor Haruhiko Kuroda described its retreat as very rapid.
In Shanghai, officials reported the first deaths from a surging Covid-19 outbreak. The city has also published plans to resume production after a prolonged lockdown, recommending businesses adopt so-called closed-loop management, where workers live on-site and are tested regularly.
Meanwhile, Ukrainian officials said the remaining defenders of Mariupol are encircled by Russian forces but have not surrendered the strategically important port city, as a deadly strike was reported in Lviv near the Polish border. Ukrainian officials will be in Washington for this week’s meetings of the International Monetary Fund and the World Bank to seek financial support.
What to watch this week:
- Earnings include American Express, Bank of New York Mellon, China Telecom, IBM, Johnson & Johnson, Netflix, Tesla
- Easter Monday market closures in the U.K., much of Europe
- IMF/World Bank spring meetings start, Monday
- St. Louis Fed President James Bullard to speak, Monday
- Chicago Fed President Charles Evans to speak, Tuesday
- EIA crude oil inventory report, Wednesday
- China loan prime rates, Wednesday
- Federal Reserve Beige Book, Wednesday
- French presidential election debate, Wednesday
- San Francisco Fed President Mary Daly, Chicago Fed President Charles Evans, due to speak, Wednesday
- Euro zone CPI, U.S. initial jobless claims, Thursday
- Fed Chair Jerome Powell, ECB President Christine Lagarde discuss global economy at IMF event, Thursday
- Manufacturing PMIs: Euro zone, France, Germany, U.K, Friday
- Bank of England’s Andrew Bailey to speak, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 rose 0.2% as of 9:39 a.m. New York time
- The Nasdaq 100 was little changed
- The Dow Jones Industrial Average rose 0.4%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.0804
- The British pound fell 0.2% to $1.3040
- The Japanese yen was little changed at 126.55 per dollar
Bonds
- The yield on 10-year Treasuries declined one basis point to 2.82%
Commodities
- West Texas Intermediate crude rose 1.2% to $108.22 a barrel
- Gold futures rose 1.1% to $1,997 an ounce
