NEW YORK :A gauge of global stocks retreated for a second straight session on Monday, easing further from a record high as investors braced for U.S. inflation data this week which could heavily influence the Federal Reserve’s interest rate path.
Stocks have hit multiple record highs this year, and declined on Friday following a mixed U.S. payrolls report that did little to alter expectations for the Fed to begin cutting rates in June.
Attention now turns to U.S. inflation data due on Tuesday in the form of the consumer price index (CPI), with expectations for a monthly increase of 0.4 per cent and 3.1 per cent on an annual basis.
The Dow Jones Industrial Average fell 180.11 points, or 0.46 per cent, to 38,546.22, the S&P 500 lost 19.01 points, or 0.35 per cent, to 5,105.57 and the Nasdaq Composite lost 27.01 points, or 0.17 per cent, to 16,060.50.
“There are two ways stocks can get hit here – in the very, very near-term you can get an upside surprise to CPI and you get further inversion of the yield curve and that just kind of punts the eventual reckoning down the street a few blocks,” said Brian Nick Senior Investment Strategist at The Macro Institute in New York.
“But what we’re more concerned about is that there’s emerging weakness in a lot of the current activity.”
U.S. Treasury yields edged up ahead of the data, with the yield on benchmark U.S. 10-year notes up 1.4 basis points to 4.102 per cent from 4.088 per cent late on Friday. The 2-year note yield, which typically moves in step with interest rate expectations, rose 5 basis points to 4.536 per cent.
The Fed is scheduled to release its next policy statement on March 20 and investors have all but ruled out a cut, with expectations at 97 per cent the Fed will hold rates steady, according to CME’s FedWatch Tool.
Last week, comments from Fed Chair Jerome Powell and European Central Bank policymakers buoyed expectations interest rate cuts will begin this summer. Expectations for a cut of at least 25 basis points (bps) at the June meeting are currently above 70 per cent.
MSCI’s gauge of stocks across the globe fell 2.58 points, or 0.33 per cent, to 768.72.
The STOXX 600 index closed down 0.35 per cent, while Europe’s broad FTSEurofirst 300 index ended down 6.47 points, or 0.32 per cent lower, weighed down by declines in the technology sector.
The dollar index gained 0.19 per cent at 102.87.
The greenback was slightly weaker against the yen down 0.05 per cent at 147.025 per dollar. The yen had softened from earlier levels after Reuters reported that a growing number of Bank of Japan policymakers are warming to the idea of ending negative interest rates this month.
In addition, data released on Monday showed Japan was not in recession after economic growth was revised up to an annualized 0.4 per cent for the December quarter.
Crude prices were mixed, as U.S. crude settled down 0.1 per cent at $77.93 a barrel and Brent settled at $82.21 per barrel, up 0.16 per cent to on the day as concerns eased that fighting in the Middle East would disrupt supply and Chinese data suggested weak demand, while an increase in U.S. refining limited any selling.
In cryptocurrencies, bitcoin gained 4.3 per cent to $72,424 after hitting a record $72,739.48.
