Stocks Decline After Weak Data, Treasuries Gain: Markets Wrap

U.S. stocks fell as weak data on New York manufacturing and the Chinese economy heightened concerns over the outlook for global growth. Treasuries gained with the dollar, while commodities from oil to iron ore tumbled.

The S&P 500 traded off session lows, with energy stocks suffering the steepest losses while investors gravitated toward defensive sectors such as consumer staples and healthcare. Treasury yields declined and the bond curve remained deeply inverted, pointing to worries that the Federal Reserve’s campaign of monetary tightening against high inflation will spark a US recession.

US stocks are coming off a fourth straight weekly gain, the longest run this year, with sentiment buoyed by signs of slowing price pressures that stirred hopes of a shift by the Fed to less aggressive rate hikes and a gradual slowdown in the economy. Still, the rally has left market breadth looking stretched with stocks vulnerable to a pullback as fears over a downturn resurface.

A gauge of New York state manufacturing activity plunged by the second-most in data back to 2001, with sharp declines in orders and shipments indicating an abrupt downturn in demand, a report showed Monday.

Meanwhile, data showed China’s July retail sales, investment and industrial output missed economists’ estimates, and in the euro area, the risk of a recession has reached the highest level since November 2020, according to economists polled by Bloomberg.

“It’s been an underwhelming start to the week in financial markets with the eternal optimism of investors clashing with the reality of Chinese economic data,” said Craig Erlam, a senior market analyst at Oanda Europe Ltd. Investors have shown “a ​ bizarre willingness to turn a blind eye to the economic reality at the moment as long as the Fed doesn’t raise rates too fast,” though that’s not sustainable, he said.

Oil shed more than 5%, while iron ore, copper and other metals declined amid mounting concerns that China’s sluggish recovery will curb demand for raw materials. Gold retreated below $1,800 an ounce and Bitcoin hovered above $24,000.

Here are some key events to watch this week:

• Earnings include Walmart, Target, Home Depot, Tencent
• Hedge funds’ 13F filings, Monday
• Federal Reserve July minutes, Wednesday
• New Zealand rate decision, Wednesday
• UK CPI, US retail sales, Wednesday
• Australia unemployment, Thursday
• U.S. existing home sales, initial jobless claims, Conference Board leading index, Thursday
• Fed’s Esther George, Neel Kashkari speak at separate events, Thursday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2% as of 11:29 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average was little changed
• The Stoxx Europe 600 rose 0.3%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.5%
• The euro fell 0.7% to $1.0187
• The British pound fell 0.5% to $1.2077
• The Japanese yen rose 0.3% to 133.07 per dollar

Bonds

• The yield on 10-year Treasuries declined five basis points to 2.78%
• Germany’s 10-year yield declined nine basis points to 0.90%
• Britain’s 10-year yield declined nine basis points to 2.02%

Commodities

• West Texas Intermediate crude fell 4.1% to $88.28 a barrel
• Gold futures fell 1.2% to $1,794.50 an ounce

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