U.S. Stocks Fall as Treasuries Waver; Oil Falls: Markets Wrap

U.S. stocks fell in early trading on Monday as investors weighed economic risks from inflation and tightening monetary policy against prospects for continued growth. Bonds reversed an earlier slide, while oil declined.

The S&P 500 slipped, with energy stocks leading losses, while the tech-heavy Nasdaq 100 posted modest gains. Oil tumbled on concern China’s worsening virus resurgence will hurt demand in the world’s biggest crude importer.

The 10-year Treasury rose, sending the yield down to 2.45%, from a session high of 2.55%. Earlier yields on five-year Treasuries rise above those on 30-year bonds, suggesting some investors expect an economic downturn.

A growing number of money managers are betting equity indexes have already largely priced in bearish bond moves, as equity strategists from Goldman Sachs Group Inc. to JPMorgan Chase & Co. reassure stock investors that there’s no need to fret about U.S. Treasury yield curve just yet.

Still, the war in Ukraine continues to disrupt supplies of key commodities, stoking inflation risks that are contributing to expectations of more aggressive Federal Reserve tightening. Mobility restrictions in China may fan worries about rising costs.

“The risk of recession in the next two years has risen dramatically as we now have a central bank that will ultimately have to kill off the recovery to tame inflation,” said Kellie Wood, deputy head of fixed income at Schroders Australia. “It looks a lot like 1994, where we believe the U.S. cash rate can move up to 2.5-3% in 12-18 months.”

Tesla Inc. plans to suspend production at its Shanghai plant for at least one day, people familiar with the matter said. The electric-vehicle maker rose in premarket trading after saying it plans to seek shareholder approval for a move that would enable another stock split.

Ukraine Talks

In the latest geopolitical developments, Ukrainian and Russian negotiating teams are set to resume in-person talks this week. President Joe Biden tried to temper comments calling for the removal of Vladimir Putin by saying the U.S. isn’t seeking regime change in Moscow.

Global shares have recovered from the lows sparked by Russia’s invasion, but questions remain about the durability of the equity market advance.

It may be that what we’re seeing is “more a bear-market rally,” Chris Weston, head of research with Pepperstone Financial Pty, wrote in a note. He added that investment flows related to portfolio rebalancing at the end of March and the first quarter could lead to “big and questionable moves.”

Some key events to watch this week:

• President Joe Biden due to release his 2023 budget, Monday
• Bank of England Governor Andrew Bailey to speak, Monday
• Australia’s annual budget, Tuesday
• Philadelphia Fed President Patrick Harker to speak, Tuesday
• U.S. GDP, Wednesday
• Richmond Fed President Thomas Barkin to speak, Wednesday
• China manufacturing, non-manufacturing PMIs, Thursday
• OPEC and non-OPEC ministerial meeting to discuss production targets, Thursday
• New York Fed President John Williams to speak, Thursday
• U.S. jobs report, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.2% as of 9:32 a.m. New York time
• The Nasdaq 100 rose 0.1%
• The Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 rose 0.6%
• The MSCI World index fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index rose 0.5%
• The euro fell 0.2% to $1.0963
• The British pound fell 0.6% to $1.3098
• The Japanese yen fell 1.5% to 123.84 per dollar

Bonds

• The yield on 10-year Treasuries declined two basis points to 2.46%
• Germany’s 10-year yield declined two basis points to 0.57%
• Britain’s 10-year yield declined five basis points to 1.64%

Commodities

• West Texas Intermediate crude fell 7.1% to $105.80 a barrel
• Gold futures fell 1.1% to $1,939.10 an ounce

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