Stocks fall with dollar while oil rises; earnings and Fed meeting are in focus

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  • U.S. stocks chop around with Nasdaq weakest
  • Euro zone survey shows German morale dropping
  • Fed in focus with two-day policy meeting on Tuesday

NEW YORK, July 25 (Reuters) – U.S. equities were choppy on Monday with the Nasdaq (.IXIC) leading declines ahead of a big week of technology earnings reports while oil prices rose and treasury yields edged higher as investors braced for a Federal Reserve interest rate hike.

In currencies, the dollar index, which touched a 20-year high earlier this month, was down slightly and gold also slipped. read more

Janet Yellen, the U.S. Treasury Secretary, had said on Sunday that while U.S. economic growth was slowing, a recession was not inevitable. read more

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Treasury yields edged slightly higher as investors awaited the Federal Reserve’s likely 75-basis-point interest rate increase later this week amid growing concerns about an economic slowdown and the potential for recession.

Also giving investors pause was the wait for earnings in big companies such as Apple (AAPL.O), Microsoft (MSFT.O) and Amazon.com (AMZN.O), as well as second-quarter GDP data.

“Right now we’re just in a holding pattern waiting for all those developments to play out,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

“People are probably just taking some risk off ahead of the earnings. We’ve seen interest rates rise a little too so that’s helping some of the value names like banks.”

The Dow Jones Industrial Average (.DJI) fell 17.86 points, or 0.06%, to 31,881.43, the S&P 500 (.SPX) lost 7.65 points, or 0.19%, to 3,953.98 and the Nasdaq Composite (.IXIC) dropped 82.71 points, or 0.7%, to 11,751.40. read more

Earlier, a widely watched survey showed German business morale falling more than expected in July as high energy prices and looming gas shortages push Europe’s largest economy towards a recession. read more

But the pan-European STOXX 600 index (.STOXX) finished up 0.13%, while MSCI’s gauge of stocks across the globe (.MIWD00000PUS) shed 0.18%.

The German data had weighed on investor moods in Europe along with a slew of downbeat earnings and a survey over the weekend that showed some industrial companies in Germany cutting production in reaction to soaring energy prices. read more

PMIs

Meanwhile in treasuries, the gap between yields on two- and 10-year Treasury notes , seen as a recessionary indicator when the short-end yield is higher than the long end, has been inverted for more than two weeks.

“This is the first meaningful yield curve inversion we’ve had since 2006 for any period of time,” said David Petrosinelli, senior trader at InspereX, adding that this fed into a generally accepted narrative of a slowdown at the very least.

Benchmark 10-year notes last fell 9/32 in price to yield 2.8123%, from 2.781% late on Friday. The 2-year note last fell 3/32 in price to yield 3.035%, from 2.991%.

In currencies, the dollar index, which measures the greenback against a group of major currencies, fell 0.244%, with the euro up 0.13% to $1.0223.

The Japanese yen weakened 0.39% versus the greenback at 136.59 per dollar, while sterling was last trading at $1.2054, up 0.43% on the day.

“Pre-Fed caution is keeping the dollar off its highs. The market is going to be eager to see if the run of softer data has in any way changed the Fed’s hawkish rate path,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC.

“The economy continues to show pretty solid underlying momentum but at the same time, high inflation, rising interest rates, they are certainly having an impact on the economy.”

Oil prices rose on Monday, bolstered by a slightly weaker U.S. dollar while investors seesawed between supply fears and bets rising U.S. interest rates could weaken demand.

U.S. crude last rose 1.9% to $96.45 per barrel and Brent was at $104.98, up 1.7% on the day.

Spot gold dropped 0.5% to $1,718.72 an ounce as investors positioned themselves ahead of the Fed meeting.

Bitcoin last fell 3.1% to $21,885.31.

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Additional reporting by Herbert Lash and Chuck Mikolajczak in New York, Tommy Wilkes in London, Kevin Buckland in Tokyo, Lucy Raitano in London, editing by Mark Heinrich and Marguerita Choy

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