*
Main U.S. indexes modestly red: Nasdaq off most, down
~0.5%
*
U.S. Jan construction spending < estimate
*
Feb ISM mfg PMI < est; prices paid > est
*
Real estate weakest S&P 500 sector; energy leads gainers
*
Euro STOXX 600 index off ~0.1%
*
Dollar, crude decline; gold up, bitcoin gains >2%
*
U.S. 10-Year Treasury yield rises to ~4%
Welcome to the home for real-time coverage of markets brought to
you by Reuters reporters. You can share your thoughts with us at
U.S. STOCKS STRUGGLE AS RATES STILL WEIGH ON SENTIMENT (1001 EST/1501 GMT) The main U.S. indexes are tilted lower early on Wednesday as the prospect for higher rates for longer continued to weigh on parts of the market, while investors also looked to snatch up some beaten down stocks. Some analysts are concerned that stocks have further room to fall even after recent weakness, as they have not yet caught up to the rapid repricing in the bond market as it adjusts for a more hawkish Fed policy. “Shortly following the early February Fed meeting, rates increased sharply, while equity markets initially rallied. This opened a divergence between equities and bonds that has yet to close, despite the modest equity market decline over the past ~1.5 weeks,” JPMorgan analysts including Marko Kolanovic said in a note sent on Wednesday. Here is a snapshot of where markets stood around 1000 EST:
(Karen Brettell)
*****
SAFE AND EASY BOND YIELDS BACK IN PLAY? (0947 EST/1447 GMT)
Investing in U.S. markets is turning out to be more
difficult than what many were expecting coming into 2023, but as
the high-inflation, high-rates environment takes the shine off
equities, returns from the bond markets aren't looking so bad.
The yield on six-month Treasury bills hit a 15-year high of 5.1% and the return on 30-year bonds is at 3.8%, making investments in government-backed securities a more attractive alternative to the rational investor. Compare that to the highest dividend yielding sectors on the S&P 500 index, real estate (3.6%), utilities (3.5%) and energy (3.5%) and it's a no-brainer.
The dividend yield on the benchmark S&P 500 now stands at 2.2%.
"Money chased an 'easy, safe 5% plus yield' on short-term Treasury bills from the market, as dividend investors questioned the spread," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. Analysts still see fourth earnings declining 3.2%, per Refinitiv data, with high-profile firms including Intel Corp , Newmont Corporation and VF Corp all having announced dividend cuts since the start of the year.
To make things more difficult, money markets are now seeing
a peak rate of 5.43% by September with little to no chance of
the Federal Reserve cutting rates this year. However, all hope is not lost as Silverblatt notes S&P 500
dividends are still expected to grow through 2023 on bets of a
mild recession, even as the economy slows and interest rates
rise.
(Shreyashi Sanyal, Johann M Cherian)
*****
NASDAQ 100 TRIPLE-Qs: GOING WITH THE FLOW? (0901 EST/1401
GMT)
The Invesco QQQ Trust Series 1 , which tracks the
Nasdaq 100 index , took a beating last year, losing 33% of
its value. That said, amid that weakness, one indicator, the
money flow index (MFI), survived tests of a long-term monthly
support line.
Now, early in 2023, along with burgeoning QQQ strength, the
MFI has vaulted to a more than one-year high:
Amid last year's collapse, and despite a series of lower QQQ lows, the MFI, and indicator that incorporates both price and volume, held the support line from its 2002 trough. That support line proved to be a staging ground, ultimately leading to an upward QQQ reversal, which saw the ETF hit a six-month high in February. Given the MFI's tendency to respect long-term monthly support and resistance lines, 2022 may have marked a significant trough for the indicator. However, the MFI, now just over 53, will need to clear the resistance line from its 2014 high, now around 61, to add credence to the bullish turn.
Conversely, an MFI reversal and break of its 2022 low, at
28.7, would see it spill out of its long-term channel. That
could suggest potential for QQQ to see another waterfall slide
given the substantial room before the indicator would reach its
2009 trough at 16.6 or its 2002 low at 11.2.
(Terence Gabriel)
*****
FOR WEDNESDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EST/1400
GMT - CLICK HERE
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
QQQ03012023B Treasury yields v div yields Monitor ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
