(Bloomberg) — A selloff in the world’s largest technology companies hit stocks, with traders also shunning riskier assets ahead of the weekend amid geopolitical uncertainties.
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Equities fell at end of a week that saw the S&P 500 dropping below 5,000, following a rally that sent the benchmark to all-time highs and spurred warnings for a consolidation. A drumbeat of hawkish Fedspeak and a flare-up in inflation worries have weighed heavily on sentiment, with investors trimming their bets on the keenly anticipated central bank pivot. While the latest tensions in the Middle East seemed contained, traders opted for a cautious stance.
That being said, nothing can be taken for granted, and markets may remain on edge — especially considering the looming weekend risk, according to Fawad Razaqzada at City Index and Forex.com. He added that inflation continues to be a focal point due to its potential influence on monetary policy.
“The stock market has been declining in recent weeks because rate cut expectations have dropped significantly — and investors are not surprisingly taking some profits after the strong market performance seen during the first quarter,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management.
The S&P 500 is on track for its sixth consecutive drop — the longest losing streak since October 2022. The Nasdaq 100 fell 1.5%. The “Magnificent Seven” megacaps that have powered this year’s surge slumped, with Nvidia Corp. down over 4% and Apple Inc. heading for its lowest close in almost a year. Netflix Inc. tumbled on a bearish forecast.
Treasury 10-year yields declined one basis point to 4.62% — almost erasing an earlier plunge of 14 basis points. Oil trimmed a major advance to trade only marginally higher after Iranian media appeared to downplay the effect of Israeli strikes.
The stock market is heading toward its third consecutive weekly decline — the longest losing run since September. After a 10% gain in the first quarter — the strongest start to a year since 2019 — investors have been increasingly skeptical about how much further it could go over the near term, even accounting for the continued strength in the economy.
“Geopolitical and political uncertainty join inflation, rates, and the Fed in pressuring markets, driving a rapid and dramatic shift in the complexion of markets and the attitude of investors,” said Mark Hackett at Nationwide.
Federal Reserve officials have said they will need to see more data to become confident enough that inflation is headed to their 2% target before starting to cut interest rates. Investors have dramatically pared bets on easing since the beginning of the year, with markets now seeing one or two rate cuts as likely in 2024, down from as many as six a few months ago.
Fed Bank of Chicago President Austan Goolsbee said progress on inflation has stalled, meriting a pause to allow incoming data to provide more insight into how the economy evolves.
Economists in the latest Bloomberg monthly survey reduced the probability of a recession in the next 12 months to 30% — the smallest odds since June 2022 and down from 35% last month. The upper boundary of the Fed’s target range for its benchmark interest rate, currently 5.5%, will fall only to 4% by the end of 2025, according to the survey. That’s a half percentage point higher than respondents expected just a month ago.
Investors are pulling money out of equities as a strong US economy and sticky inflation fuel concerns that the Fed will keep interest rates higher for longer, according to Bank of America Corp. strategists.
A team led by Michael Hartnett wrote in a note that good economic news is now bad news for stocks, a shift in mindset from the first quarter when “good news = good.” Evidence of this is the $21.1 billion investors redeemed from stock funds in the two weeks through Wednesday, the most in a fortnight since December 2022, BofA said, citing data from EPFR Global.
Companies that move goods around and serve as a bellwether for the American economy sent up a smoke signal this week.
The Dow Jones Transportation Average has tumbled to levels last seen in November and is on track to end lower for the third straight week. Moreover, the losses pushed the index deep below its 200-day moving average, a long-term trend indicator that traders closely watch. It is also on pace for the worst month since October.
The US stock market’s retreat from all-time highs set late last month is giving investors parked in cash an opening to buy in, according to Sinead Colton Grant, chief investment officer of BNY Mellon’s wealth management arm.
The three-week slump in the S&P 500 Index is a healthy consolidation by traders after it soared 10% in the first quarter, on top of a 24% gain in 2023, she said. From here, Colton Grant expects the rally to not only resume but broaden based on strong earnings growth and continuing economic momentum, potentially pushing the S&P 500 beyond the higher end of her 5,000-5,400 target range before 2024 closes out.
Corporate Highlights:
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Trump Media & Technology Group Corp. says an illegal form of short selling might be behind the battering of its stock and it’s asking regulators at Nasdaq Inc. to step in.
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American Express Co. reported revenue that topped estimates in the first three months of the year as consumers continued to flock to the company’s premium credit-card offerings.
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Procter & Gamble Co., the maker of Pampers diapers and Dawn dish soap, reported quarterly sales that fell short of Wall Street estimates, overshadowing an improved profit outlook.
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SLB, the world’s biggest oil-services provider, said it is gearing up for a rebound in activity in the Northern Hemisphere during the second quarter after starting off the year with typical seasonal slowness.
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Super Micro Computer Inc. sank after the maker of servers announced the date of its third-quarter results but didn’t pre-announce results.
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The US Federal Aviation Administration is investigating an incident where a passenger was apparently granted unauthorized access to the cockpit of a United Airlines Holdings Inc. charter flight traveling from Denver to Toronto.
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Nordstrom Inc.’s founding family has notified the board of its interest in taking the company private.
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Mondi Plc walked away from a possible bidding battle for UK packaging rival DS Smith Plc, a move that secures a deal for US bidder International Paper Co.
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.3% as of 1:52 p.m. New York time
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The Nasdaq 100 fell 1.3%
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The Dow Jones Industrial Average rose 0.8%
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The MSCI World index fell 0.5%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.1% to $1.0657
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The British pound fell 0.5% to $1.2375
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The Japanese yen was little changed at 154.61 per dollar
Cryptocurrencies
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Bitcoin rose 1.8% to $64,642.67
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Ether rose 0.5% to $3,084.81
Bonds
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The yield on 10-year Treasuries declined one basis point to 4.62%
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Germany’s 10-year yield was little changed at 2.50%
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Britain’s 10-year yield declined four basis points to 4.23%
Commodities
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West Texas Intermediate crude rose 0.8% to $83.39 a barrel
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Spot gold rose 0.6% to $2,394.37 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Farah Elbahrawy, Esha Dey and Alexandra Semenova.
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