Archives: Reuters Articles

May 31 (Reuters) – Wall Street’s three major indexes closed lower on Tuesday, following a rally last week, as volatile oil markets kept soaring inflation in focus and investors reacted to hawkish comments from a Federal Reserve official.

After outperforming earlier in the session, the S&P’s energy sector lost ground after a report that some producers were exploring the idea of suspending Russia’s participation in the OPEC+ production deal.

Federal Reserve policy was also top of mind for investors as US President Joe Biden and Fed Chair Jerome Powell met on Tuesday to discuss inflation, which Biden said ahead of the meeting was his “top priority.”

This was after Fed Governor Christopher Waller said on Monday the US central bank should be prepared to raise rates by a half percentage point at every meeting from now on until inflation is decisively curbed.

“The market’s trying to figure out the endgame for the Fed,” said Jack Janasiewicz, portfolio manager at Natixis Investment Management solutions.

And while lower commodity prices would be good news for equities in the longer term, the impact of the report about OPEC and Russia on the energy sector may have spooked the broader market a little on Tuesday.

“That’s the sort of thing that has the market on edge,” said Janasiewicz. “When we started out, the sector leading us higher was energy.”

By the session’s close, the biggest decliner among the S&P’s 11 major industry sectors was energy, down 1.6%.

The only sector gainers were consumer discretionary, up 0.8%, with Amazon.com (AMZN) the S&P’s biggest boost from a single stock on the day, and communications services, up 0.4%, as Google (GOOGL) was the S&P’s next biggest contributor.

The Dow Jones Industrial Average fell 222.84 points, or 0.67%, to 32,990.12, the S&P 500 lost 26.09 points, or 0.63%, to 4,132.15 and the Nasdaq Composite dropped 49.74 points, or 0.41%, to 12,081.39.

All three indexes had rallied last week to snap a decades-long losing streak.

With Tuesday’s decline, the S&P and the Dow were essentially unchanged for May. The Nasdaq showed a monthly decline of 2%.

“There’re too many concerns at the moment for markets to do a sharp V-bottom,” said Carol Schleif, deputy chief investment officer at BMO Family Office, who sees equities trading sideways for some time due to uncertainties including the Russia-Ukraine war, the global economy and inflation, as well as Fed policy.

“A piece of it is energy prices because at the margin those really impact people’s propensity to spend. People are really noticing the higher prices at the grocery store,” she said.

Earlier in the day, data showed US consumer confidence eased modestly in May amid persistently high inflation and rising rates, while a separate reading showed US home price growth unexpectedly heated up to record levels in March.

Other key data due this week is the monthly non-farm payrolls numbers for cues on the labor market.

US-listed shares of Yamana Gold Inc. (AUY) climbed 3.7%after South African miner Gold Fields Ltd. (GFIJ), (GFI) agreed to buy the Canadian miner in a USD 6.7 billion all-share deal.

Dexcom Inc. (DXCM) closed up 3% after the glucose monitoring systems maker denied a report on merger talks with insulin pump maker Insulet Corp. (PODD).

Declining issues outnumbered advancing ones on the NYSE by a 1.82-to-1 ratio; on Nasdaq, a 1.44-to-1 ratio favored decliners.

The S&P 500 posted four new 52-week highs and 29 new lows; the Nasdaq Composite recorded 53 new highs and 58 new lows.

On US exchanges 15.52 billion shares changed hands on Tuesday, compared with the 20-day moving average of 13.25 billion.

(Reporting by Sinéad Carew, Anisha Sircar, Devik Jain and Sruthi Shankar in Bengaluru; Editing by Marguerita Choy)

NEW YORK, May 27 (Reuters) – Bad news may once again be good news on Wall Street, as signs of slowing US growth fan hopes that the Federal Reserve may not need to tighten policy as much as previously expected.

Home sales have fallen for a third straight month, while big misses from retail giants such as Target Corp. (TGT) and Walmart Inc. (WMT) shook their share prices last week. The Atlanta Fed’s GDPNow estimate of real GDP growth for the second quarter fell to 1.8% on May 25, from 2.4% the previous week.

Softer economic growth raises risks of weaker corporate profits, in theory paving the way for softer share prices. Several Wall Street banks have in recent weeks warned that the chances of a US recession are rising, along with an increased likelihood of the low-growth, high-inflation environment known as stagflation.

In the near-term, however, some investors believe a nascent slowdown could bolster the case for the Fed to pull back on an aggressive monetary policy tilt that has unnerved investors and helped drive the S&P 500 index to the cusp of the 20% decline that many call a bear market.

The index rose 6.6% this week, snapping a seven-week losing streak, though it is down around 13% for the year to date. Net weekly inflows to US stocks stood at their highest level in 10 weeks, data from BofA Global Research showed Thursday.

“It’s very clear that everyone at the Fed is on board for 50 basis-point (interest rate hikes) for the next two hiking meetings. But after that, it’s unclear what they do, and if there is a sharp slowdown in growth, they may be able to wait a little bit,” said Anwiti Bahuguna, senior portfolio manager and head of multi-asset strategy at Columbia Threadneedle Investments, who recently raised her allocation to equities.

Concerns over the impact of higher rates at a time when inflation may have peaked will likely mean the central bank will pause its tightening in September, leaving its benchmark overnight interest rate in a range of 1.75% to 2% if financial conditions worsen, BofA strategists said in a note.

Expectations of Fed hawkishness have eased, with investors now pricing in a 35% probability that the Fed funds rate will be between 2.25% and 2.50% after its September meeting, down from a 50% probability a week ago, according to CME.

The Fed has already raised rates by 75 basis points this year. Minutes from the central bank’s latest meeting showed officials grappling with how best to navigate the economy toward lower inflation without causing a recession or pushing the unemployment rate substantially higher.

Signs that growth may be slowing have helped bolster Treasury prices, suggesting investors are increasingly looking to bonds for safety rather than as assets that could be at risk during times of high inflation, said Anders Persson, chief investment officer of global fixed income at Nuveen.

Yields of benchmark 10-year Treasuries, which move inversely to prices, hit a six-week low of 2.706% on Thursday, after soaring to as high as 3.14% this month.

“The market is pricing in a slowdown,” but not a recession, Persson said, making riskier parts of the fixed-income market, such as high yield bonds, more attractive.

US data on Friday also showed price increases may be slowing. The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain since November 2020, after shooting up 0.9% in March.

A potentially less hawkish Fed is not necessarily a green light for equity buyers over the long term. With inflation at its highest in decades, concerns have grown over impending stagflation, a phenomenon that weighed heavily on all asset classes during the supply shocks of the 1970s.

Among those sounding the warning are hedge fund manager Bill Ackman, a member of the Fed’s investor advisory committee on financial markets, who on Twitter this week urged the central bank to quell inflation by raising rates more aggressively.

Meanwhile, Citi’s global asset allocation team this week cut its US equity allocation to “neutral,” saying, “While a US recession is not the base case for Citi economics, uncertainty is very high.”

Some investors, however, believe a turning point may be near.

Esty Dwek, chief investment officer at FlowBank, is betting the central bank will begin to see signs that inflation and growth are slowing by August, when policymakers hold their annual meeting in Jackson Hole, Wyoming.

“The Fed is past peak hawkishness,” she said.

(Reporting by David Randall in New York; Additional reporting by Lewis Krauskopf in New York; Editing by Ira Iosebashvili, Nick Zieminski and Matthew Lewis)