U.S. Stocks, Bonds Fall as Inflation Fears Mount: Markets Wrap

U.S. stocks fell on Monday as surging energy prices cemented worries about inflation and reinforced bets on policy tightening.

The S&P 500 fell 0.4% as Apple Inc. was among the biggest decliners, while Tesla Inc. advanced with crypto and mining stocks. In Europe, consumer and retail shares led a drop on the Stoxx 600. And in Asia, stocks were mixed as China’s economy slowed in the third quarter.

The losses came after last week’s rebound on strong corporate earnings and solid economic reports were enough to outweigh concerns about energy shortages and supply-chain disruptions. However, a rise in oil and natural gas prices reignited fears Monday after OPEC and its allies failed to meet output targets and Russia opted against sending more fuel to Europe.

“The issues that caused the pullback have quieted over the past two weeks, which has rightly allowed stocks to bounce,” wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter. “But these issues are not resolved by any stretch of the imagination.”

The yield on the 10-year Treasury note climbed to 1.61% as a global bond selloff gathered pace. U.K. yields surged after the Bank of England warned on the need to respond to price pressures. Meanwhile, rate-hike bets have also picked up in Australia and New Zealand, where inflation accelerated to the fastest pace in 10 years. The dollar was stronger against major peers.

“The week ahead should provide investors further insight as to the health of the stateside economy as well as the strength and resilience of S&P 500 corporate earnings,” John Stoltzfus, chief investment strategist at Oppenheimer, wrote to clients. “Last week a glance under the hood of how things are going was provided when five of America’s biggest banks reported results with enough positive surprises among them to counter concerns that had jostled stocks ahead of their reporting.”

A slew of speakers from the Federal Reserve are expected to try to calm investors ahead of plans to tapering its asset-purchase program, said, George Goncalves, head of U.S. macro strategy at MUFG Securities, on Bloomberg Surveillance.

“We’ll see if the markets listen,” he said. “Nonetheless, tapering makes sense. And the question that really becomes is starting in November versus December.”

Events to watch this week:

• Earnings roll in, including from AT&T Inc., Barclays Plc, Johnson & Johnson, Netflix Inc. and Tesla Inc.
• Bank Indonesia rate decision and briefing, Tuesday
• China’s NPC Standing Committee starts a meeting Tuesday that goes on through Oct. 23. A review of anti-monopoly regulations is on the agenda
• U.S. housing starts, Tuesday
• EIA crude oil inventory report, Wednesday
• China property prices, loan prime rates, Wednesday
• U.S. Conference Board leading index, U.S. existing home sales, jobless claims, Thursday
• Fed Chair Jerome Powell takes part in policy panel discussion, 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 rose 0.6%
• The Dow Jones Industrial Average fell 0.4%
• The Stoxx Europe 600 fell 0.7%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1610
• The British pound was little changed at $1.3738
• The Japanese yen was little changed at 114.20 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 1.61%
• Germany’s 10-year yield advanced two basis points to -0.14%
• Britain’s 10-year yield advanced three basis points to 1.14%

Commodities

• West Texas Intermediate crude rose 1.3% to $83.35 a barrel
• Gold futures were little changed

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