The risk of an economic downturn remains a major concern for the market amid price pressures and rising borrowing costs.
Stocks fell in early New York trade as investors assessed the latest signs of economic malaise in the U.S. and China amid speculation about the trajectory of the Federal Reserve’s rate hikes.
Both the S&P 500 and the tech-heavy Nasdaq 100 retreated. Manufacturing activity in New York state unexpectedly contracted in May for the second time in three months, data on Monday showed, raising concerns that a slowdown in economic activity could complicate the Fed’s policy path. U.S. Treasury yields fell with the dollar.
The New York Fed data is the first of several regional Fed manufacturing data to be released in the coming weeks. Equally disappointing data could temper bets on a steeper rate hike cycle as the Fed battles inflation. Meanwhile, China’s industrial output and consumer spending hit their worst levels since the pandemic began, hit by the coronavirus lockdown.
The risk of an economic downturn remains a major concern for the market amid price pressures and rising borrowing costs. Lloyd Blankfein, senior chairman of Goldman Sachs Group Inc., urged businesses and consumers to prepare for a U.S. recession, calling it a “very, very high risk.” Despite a 17% drop in global stocks this year, traders remain cautious about bottoming out, with Morgan Stanley warning that any rally in U.S. stocks will be a bear market rally with more losses ahead.
“Trying to time the market can be time-consuming and loss-making,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “Investor sentiment is fickle and markets are likely to remain volatile until we get a clearer picture of the three Rs: Interest rates, recession and risk.”
Cryptocurrencies fell as stock market sentiment weakened. This brings Bitcoin back to levels around $30,000.
Food and fuel prices drive up costs.Wheat rises as India turns to foreign exchange curbs inhibition Oil exports remained at around $110 a barrel. Shanghai is nearing the necessary threshold to ease its six-week lockdown, a development that could spur bets on rising energy demand.
Meanwhile, the European Commission has warned that the euro zone’s pandemic recovery will all but stop and prices will soar faster if gas supplies from Russia are severely disrupted. Traders are also eyeing efforts by Finland and Sweden to join NATO following Russia’s invasion of Ukraine.
What to watch this week:
- Fed Chairman Jerome Powell on the list of Fed speakers on Tuesday
- The Reserve Bank of Australia releases the minutes of its May policy meeting on Tuesday
- G7 finance ministers and central bank governors meet on Wednesday
- Eurozone, UK CPI Wednesday
- Philadelphia Fed President Patrick Harker speaks Wednesday
- China loan prime rate on Friday
Some major trends in the market:
- The S&P 500 was down 0.4% as of 9:30 a.m. in New York
- The Nasdaq 100 fell 0.8%
- The Dow Jones Industrial Average fell 0.2%
- The Stoxx Europe 600 fell 0.2%
- MSCI World Index fell 0.2%
- Bloomberg Dollar Spot Index is little changed
- The euro was little changed at $1.0418
- Sterling fell 0.1% to $1.2245
- Yen/dollar was little changed at 129.18
- 10-year Treasury yield fell two basis points to 2.90%
- German 10-year bond yield rose 3 basis points to 0.98%
- UK 10-year bond yield rose 2bps to 1.77%
- West Texas Intermediate crude fell 0.4% to $110.05 a barrel
- Gold futures fell 0.2% to $1,804.90 an ounce
– With assistance from Michael Msika and Andreea Papuc.