US Two-Year Yield Eyes 5% Before Powell’s Remarks: Markets Wrap

(Bloomberg) — The world’s biggest bond market remained under pressure, with traders sifting through a slew of remarks from Federal Reserve speakers on speculation that policymakers will be in no rush to cut rates.

Most Read from Bloomberg

Just hours away from Jerome Powell’s speech, US two-year yields came closer to the 5% mark. The dollar extended its rally into a fifth straight session. Equities wavered after their worst back-to-back selloff in more than a year. Traders also scoured a batch of first-quarter earnings amid hopes that Corporate America’s resilience will help counter concerns about high rates.

“Powell is likely to set the near-term market narrative,” said Chris Senyek at Wolfe Research. “The Fed Chair is always a wildcard.”

The S&P 500 hovered near 5,060. Solid earnings from two Wall Street giants — Morgan Stanley and Bank of America Corp. did little to spark risk appetite. Megacaps were mixed. UnitedHealth Group Inc. led gains in the Dow Jones Industrial Average after beating profit expectations. Treasury 10-year yields advanced seven basis points to 4.68%. The greenback headed for its biggest five-day gain in over a year.

Policymakers around the world are struggling to confront a surging greenback and lofty US interest rates, according to Mohamed El-Erian.

“Authorities are a little bit frozen around the world as to how do you react to a generalized dollar strengthening?” El-Erian, the president of Queens’ College, Cambridge and a Bloomberg Opinion columnist, told Bloomberg Television Tuesday. “How do you react to a generalized increase in interest rates in the US?”

Fed Vice Chair Philip Jefferson said Tuesday that while there has been considerable progress in lowering inflation, the Fed’s task of sustainably restoring 2% inflation is “not yet done.” His San Francisco counterpart Mary Daly reiterated late Monday there’s no urgency to adjust interest rates, pointing to solid economic growth, a strong labor market and still-elevated inflation.

Corporate Highlights:

• Morgan Stanley’s traders delivered first-quarter revenue that exceeded expectations as its wealth management juggernaut also got back on track — both handing a key win for its new leader Ted Pick.

• Bank of America Corp. traders notched one of their best first quarters on record as the company also reaped the benefits of elevated borrowing costs that pushed net interest income above analysts’ estimates.

• PNC Financial Services Group Inc. missed estimates for net interest income in the first quarter, a sign that the Pittsburgh-based lender has continued to struggle with muted loan growth.

• The Bank of New York Mellon Corp. reported first-quarter revenue that topped estimates as the oldest US lender benefited from higher market values and increased client activity.

• Johnson & Johnson’s first-quarter profit beat estimates as the health giant’s drug sales came in higher than Wall Street analysts expected.

Story continues

Key events this week:

• Eurozone CPI, Wednesday

• Fed issues its Beige Book, Wednesday

• Cleveland Fed President Loretta Mester speaks, Wednesday

• Fed Governor Michelle Bowman speaks, Wednesday

• BOE Governor Andrew Bailey speaks, Wednesday

• Taiwan Semiconductor earnings, Thursday

• US Conf. Board leading index, existing home sales, initial jobless claims, Thursday

• Fed Governor Michelle Bowman speaks, Thursday

• New York Fed President John Williams speaks, Thursday

• Atlanta Fed President Raphael Bostic speaks, Thursday

• BOE Deputy Governor Dave Ramsden and ECB Governing Council member Joachim Nagel speak, Friday

• Chicago Fed President Austan Goolsbee speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 9:55 a.m. New York time

• The Nasdaq 100 was little changed

• The Dow Jones Industrial Average rose 0.3%

• The Stoxx Europe 600 fell 1.7%

• The MSCI World index fell 0.8%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%

• The euro was little changed at $1.0629

• The British pound was little changed at $1.2450

• The Japanese yen was little changed at 154.43 per dollar

Cryptocurrencies

• Bitcoin fell 1.4% to $62,296.51

• Ether fell 1.2% to $3,046.98

Bonds

• The yield on 10-year Treasuries advanced seven basis points to 4.68%

• Germany’s 10-year yield advanced six basis points to 2.50%

• Britain’s 10-year yield advanced seven basis points to 4.32%

Commodities

• West Texas Intermediate crude fell 0.2% to $85.24 a barrel

• Spot gold fell 0.5% to $2,370.37 an ounce

This story was produced with the assistance of Bloomberg Automation.

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.