Global stocks experienced a second consecutive decline on Monday, further retreating from recent record highs as investors awaited U.S. inflation data that could heavily impact the Federal Reserve’s interest rate decisions.
Despite reaching numerous record highs earlier this year, stocks faced a downturn on Friday following a mixed U.S. payrolls report, which did little to change expectations for the Fed to initiate rate cuts in June. U.S. inflation data, specifically the consumer price index (CPI), is scheduled for release on Tuesday, with forecasts predicting a monthly increase of 0.4% and an annual rise of 3.1%.
In Monday’s trading session, the Dow Jones Industrial Average edged up 46.97 points, or 0.12%, to 38,769.66, while the S&P 500 dipped 5.74 points, or 0.11%, to 5,117.95, and the Nasdaq Composite fell 65.84 points, or 0.41%, to 16,019.27.
Brian Nick, senior investment strategist at The Macro Institute in New York, highlighted potential risks for stocks, noting that an unexpected upside surprise in CPI could lead to further inversion of the yield curve, postponing inevitable market adjustments. He also expressed concerns about emerging weakness in current economic activity.
Ahead of the CPI release, U.S. Treasury yields saw a slight increase, with the benchmark 10-year notes up 1 basis point at 4.098%, and the 2-year note yield rising 5 basis points to 4.536%, reflecting expectations regarding interest rate movements.
Regarding the Fed’s upcoming policy statement on March 20, market participants largely anticipate the central bank to maintain steady rates, with expectations at 97% according to CME’s FedWatch Tool.
Last week, comments from Fed Chair Jerome Powell and European Central Bank policymakers fueled expectations of upcoming rate cuts starting this summer. Forecasts for a rate reduction of at least 25 basis points (bps) at the June meeting now stand above 70%.
MSCI’s global stocks gauge dipped by 2.55 points, or 0.33%, to 768.75. The STOXX 600 index closed down 0.35%, while Europe’s broad FTSEurofirst 300 index concluded the day down 6.47 points, or 0.32%, primarily due to declines in the technology sector.
The dollar index rose by 0.17% to 102.85, with the euro declining by 0.12% to $1.0924. Sterling also weakened, down by 0.37% at $1.281.
The Japanese yen saw a 0.09% strengthening against the greenback, trading at 146.94 per dollar. Earlier reports from Reuters suggested a growing inclination among Bank of Japan policymakers to end negative interest rates this month. Additionally, Japan avoided a recession as economic growth was revised up to an annualized 0.4% for the December quarter, as per data released on Monday.
In the energy markets, crude prices exhibited mixed trends, with U.S. crude settling down by 0.1% at $77.93 a barrel, while Brent settled at $82.21 per barrel, up by 0.16% on the day. Concerns over disruptions in the Middle East impacting supply eased, and Chinese data suggested weak demand. However, an increase in U.S. refining limited any significant selling pressure.
Bitcoin witnessed a 5.37% gain, reaching $72,090.50 after hitting a record high of $72,901.94.