(Bloomberg) — US equities retreated as a rally in tech stocks lost steam and persistent inflationary pressures cemented expectations for higher rates in the US and Europe. Treasuries advanced.
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The S&P 500 slipped as Amazon.com Inc.’s warning after the market close on growth in its key cloud computing business soured the buoyant mood in technology shares. Treasuries recouped some of Thursday’s losses, with the 10-year benchmark yield falling about seven basis points. The policy-sensitive two-year rate hovered above 4%.
Markets remain on edge, as data on inflation reinforced expectations of a Federal Reserve interest rate hike next week, and possibly in June.
The personal consumption expenditures price index excluding food and energy, one of the Fed’s preferred inflation gauges, rose 0.3% in March for a second month. Compared with a year ago, the measure was up 4.6%, Commerce Department data showed Friday.
Read more: US Core PCE Inflation Stays Brisk While Consumer Spending Stalls
“What looks like sticky contemporaneous inflation remains an issue, preventing the market from getting too carried away on the rate-cutting phase to come in subsequent quarters,” wrote Padhraic Garvey, head of global debt and rates strategy at ING Financial Markets.
A measure of employment costs from the Department of Labor also increased 1.2% in the first quarter from the previous period, exceeding expectations.
US equities are on track to end the month 0.5% higher, as strong corporate results have lifted sentiment amid concerns about Fed policy and a looming recession. Analysts at Berenberg said equities’ strong year-to-date gains had been driven by resilient earnings and receding pessimism on economic growth, but “risks are skewed to the downside over the coming months, with headwinds from tighter policy, margin headwinds and US recession.”
Read more: Snap Shares Set for Biggest Drop in Six Months After Sales Fall
In Europe, the Stoxx 600 drifted as an uptick in consumer-price gains pointed to more rate increases by the European Central Bank, which also meets next week.
In contrast, the Bank of Japan renewed its commitment to stimulus in its first meeting under new governor Kazuo Ueda. It left its short-term policy rate at minus 0.1%, maintained its 0.5% ceiling for 10-year bond yields, and launched a policy review that may take one-and-a-half years. Japanese stocks surged while the yen tumbled.
Elsewhere, oil prices headed for a sixth straight monthly decline. Gold fell, and Bitcoin was little changed.
Here are some of the main moves in markets:
The S&P 500 fell 0.1% as of 9:30 a.m. New York time
The Nasdaq 100 was little changed
The Dow Jones Industrial Average fell 0.2%
The Stoxx Europe 600 rose 0.1%
The MSCI World index rose 1.2%
The Bloomberg Dollar Spot Index rose 0.3%
The euro fell 0.2% to $1.1008
The British pound was little changed at $1.2508
The Japanese yen fell 1.5% to 135.97 per dollar
Bitcoin fell 0.9% to $29,355.28
Ether fell 0.8% to $1,905.16
The yield on 10-year Treasuries declined eight basis points to 3.44%
Germany’s 10-year yield declined 11 basis points to 2.35%
Britain’s 10-year yield declined six basis points to 3.73%
This story was produced with the assistance of Bloomberg Automation.
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