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Expectations for 25 basis point Fed rate hike climb
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Dollar hits one-month high vs yen
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Stocks set for more bank earnings this week
By Chuck Mikolajczak NEW YORK, April 17 (Reuters) - A gauge of global stocks retreated for a second straight session on Monday as investors digested another round of corporate earnings, while the dollar and U.S. Treasuries yields rose on expectations of a rate hike from the Federal Reserve in May. After the first wave of bank earnings last week from names such as JP Morgan and Wells Fargo were better than anticipated, investors will now see results from the likes of Goldman Sachs , Morgan Stanley , Bank of America and a host of regional banks.
Other notable S&P 500 companies scheduled to report earnings this week include Johnson & Johnson , Netflix and Tesla .
On Wall Street, stocks were modestly lower after giving up early gains, but held within a tight trading range. State Street plunged 10.72%, on track for its biggest daily percentage decline since March 2020, after posting quarterly results.
"There were some earnings that weren't great and State Street was one of those," said Joe Saluzzi, co-manager of trading at Themis Trading. "The focus shifts from inflationary worries to what corporate earnings are looking like and how far of a negative do we have here." The Dow Jones Industrial Average fell 83.98 points, or 0.25%, to 33,802.49, the S&P 500 lost 13.51 points, or 0.33%, to 4,124.13 and the Nasdaq Composite dropped 45.52 points, or 0.38%, to 12,077.95. In Europe, stocks ended just barely lower to snap a five-session streak of gains, with the pan-European STOXX 600 index down 0.01%. The winning streak was the longest for the index in three months.
MSCI's gauge of stocks across the globe shed 0.33%. U.S. yields climbed and the dollar strengthened, buoyed in part by economic data that showed a rebound in New York factory activity, while confidence among U.S. single-family homebuilders improved for a fourth straight month in April. The data helped to fuel growing expectations the Fed will raise rates by 25 basis points at its May meeting.
While many see the Federal Reserve as closer to ending its rate hike cycle than other global central banks, economic data has indicated the economy is not near a recession yet, giving the Fed leeway to continue with rate hikes.
Market expectations for a 25 basis point hike at the May meeting have risen to more than 86%, up from the 78% on Friday, according to CME's FedWatch Tool.
The yield on 10-year Treasury notes was up 6.7 basis points to 3.589%.
The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 9.1 basis points at 4.194%.
The dollar index rose 0.482%, with the euro down 0.74% to $1.0918. The Japanese yen weakened 0.51% versus the greenback at 134.47 per dollar, while Sterling was last trading at $1.2364, down 0.39% on the day. The greenback hit a one-month high against the yen as the Bank of Japan is widely expected to keep a loose monetary policy.
A bevy of Fed officials are scheduled to speak this week,
as investors have a heightened focus on their comments ahead of
the blackout period that begins on April 22 ahead of the central
bank's May 2-3 meeting. .
S&P 500 earnings are expected to fall 4.8% from the year-earlier quarter, per Refinitiv data through Friday. In the early portion of the earnings season, 30 companies have reported earnings, with 93.3% topping expectations.
The dollar strength and recession concerns weighed on crude prices, as U.S. crude recently fell 2.1% to $80.79 per barrel and Brent was at $84.68, down 1.89% on the day. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Dollar hits one-month high against yen World FX rates YTD Empire State ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Sruthi Shankar and Ankika Biswas in Bengaluru; Karen Brettell in New York, Editing by Angus MacSwan and Sharon Singleton)
