(Bloomberg) — US equity futures declined amid growing conviction that the Federal Reserve will hold interest rates higher for longer to curb a resilient economy — with some investors even starting to speculate that the next move may be up.
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Futures on the S&P 500 and Nasdaq 100 were pointing to a down day when Wall Street reopens after Monday’s public holiday. Nvidia Corp. declined in pre-market trading ahead of its widely anticipated earnings report due Wednesday. Discover Financial Services surged after Capital One Financial Corp. agreed to buy the credit card issuer. Capital One dropped. The 10-year Treasury yield and the dollar were steady.
Traders have in recent weeks moved rate-cut expectation out to June, from March, as a phalanx of Federal Reserve officials warned against over-exuberant expectations of policy easing, and economic data continued to surprise to the upside. Former US Treasury Secretary Lawrence Summers said on Friday “there’s a meaningful chance” the next move is up.
Investors will also be wary ahead of the Fed January meeting minutes to be released Wednesday, but most of the focus will be on Nvidia. The chip giant has surpassed the market value of Amazon.com Inc on the expectation it will be a big winner from artificial intelligence developments. The two companies together with Meta Platforms Inc. and Microsoft Corp. have collectively contributed almost 60% of the S&P 500’s year-to-date rally.
“Nvidia results on Wednesday could be a turning point for the markets,” Charles-Henry Monchau, chief investment officer for Banque Syz, said on Bloomberg Television. “The market relies on very few large-cap growth stocks and if they disappoint for any reason there is a risk of a pullback.”
The Stoxx Europe 600 index dipped, putting it on track to snap a four-day rising streak that took it to within two points of its January 2022 record high on Monday. European bonds gained, with Germany’s 10-year yield falling about four basis points.
Miners Anglo American Plc and Rio Tinto Plc led basic-resources stocks lower after a slump in iron ore prices, with Bloomberg’s index of industrial metals down 0.7%. Sandoz Group AG tumbled more than 7% after Morgan Stanley downgraded the Swiss pharmaceutical company’s stock, citing near-term uncertainty.
The chemicals sub-sector outperformed, with Air Liquide SA jumping more than 4% after the French gas producer beat analysts’ expectations for margin expansion. Barclays Plc soared as much as 6% after announcing plans for capital returns. Evolution AB climbed almost 5% after US regulators terminated a probe into the Swedish online gambling firm.
Elsewhere, Asian stocks fell after a reduction in China’s mortgage reference rate failed to dispel concerns about the world’s no. 2 economy. Benchmarks in Japan, Australia and South Korea were all in the red. Chinese stocks fluctuated.
The cut to the five-year loan prime rate was a “good gesture from the commercial banks but still now the property problem is not about the mortgage rate,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd. The move may “slightly boost the property demand but I would not expect much.”
Healthy Demand
In Australia, BHP Group, the world’s largest miner, reported $6.57 billion in underlying profits, less than consensus estimates, and said demand from top customer China was healthy despite weakness in housing.
Elsewhere, gold was little changed after edging higher Monday to trade around $2,020 per ounce. West Texas Intermediate, the US oil price, edged higher against the backdrop of ongoing tensions in the Red Sea, a vital trade route.
Some of the key events this week:
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Rio Tinto Plc earnings, Wednesday
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Eurozone consumer confidence, Wednesday
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Nvidia Corp earnings, Wednesday
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Federal Reserve Jan. meeting minutes, Wednesday
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Atlanta Fed President Raphael Bostic speaks, Wednesday
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Eurozone CPI, PMI, Thursday
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European Central Bank issues account of Jan. 25 meeting, Thursday
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Fed Governor Lisa Cook, Minneapolis Fed President Neel Kashkar speak, Thursday
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China property prices, Friday
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European Central Bank executive board member Isabel Schnabel speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.4% as of 6:23 a.m. New York time
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Nasdaq 100 futures fell 0.6%
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Futures on the Dow Jones Industrial Average fell 0.4%
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The Stoxx Europe 600 fell 0.1%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.2% to $1.0798
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The British pound was little changed at $1.2596
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The Japanese yen was little changed at 150.20 per dollar
Cryptocurrencies
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Bitcoin rose 0.8% to $52,325.51
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Ether fell 1.2% to $2,933.7
Bonds
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The yield on 10-year Treasuries was little changed at 4.28%
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Germany’s 10-year yield declined three basis points to 2.38%
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Britain’s 10-year yield declined six basis points to 4.05%
Commodities
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West Texas Intermediate crude fell 0.4% to $78.88 a barrel
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Spot gold rose 0.4% to $2,025.89 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson and Michael Msika.
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