Stocks Slip as Rates, Earnings Uncertainty Grips: Markets Wrap

(Bloomberg) — Stock markets edged lower Friday after a hotter-than-expected US inflation reading sowed uncertainty about the interest-rate outlook, and investors waited for the earnings season to kick off.

Europe’s Stoxx 600 index traded flat, with France’s CAC 40 gauge recouping an earlier slide after authorities unveiled a budget that will raise taxes on businesses and wealthy citizens. Contracts on the Nasdaq 100 slipped 0.3%, dragged down by a 6% premarket drop in Tesla Inc. shares, after its robotaxi Cybercab launch was seen as light on detail. 

Treasury bond yields held above 4% after Thursday’s US data showed a strong inflation print but a sharp rise in jobless claims, underscoring the challenge facing the Federal Reserve. Investors will monitor producer-price numbers later on Friday to gauge if the Fed’s battle to bring prices to target is stalling.  

“The data is mixed and it’s probably confusing markets,” said Justin Onuekwusi, CIO at UK wealth manager St. James’s Place. “It’s a key period when the Fed is going to be be data dependent, and the data is maybe not making the most most sense.”

Fed policymakers John Williams, Austan Goolsbee and Thomas Barkin were unfazed by the higher-than-forecast consumer price index, suggesting officials can continue lowering rates. Swaps markets price a roughly 80% chance of a 25 basis-point cut in November. 

Friday also brings third-quarter earnings from JPMorgan Chase & Co., Wells Fargo & Co and Bank of New York Mellon Corp.

JPMorgan’s outlook for net interest income will be a major focus, after executives tried to temper expectations for the key revenue source. As for Wells Fargo, investors may look for updates on its asset cap.

Wolf von Rotberg, equity strategist at Bank J. Safra Sarasin, upgraded S&P 500 targets for the coming quarters and reckons “earnings have room to surprise on the upside, given that the cycle has generally improved since the beginning of September.”

Earlier, China’s CSI 300 Index dropped 2.4% ahead of a key weekend briefing that may offer details on Beijing’s plan to support the economy. Investors and analysts expect Beijing to deploy as much as 2 trillion yuan ($283 billion) in fresh fiscal stimulus. 

“The market estimated a 2 trillion yuan fiscal package and therefore anything below that would be disappointing,” said Benjamin Melman, CIO at Edmond de Rothschild Asset Management. But the measures will take at least two to three quarters to filter through to Europe, he said, adding he doesn’t expect “any meaningful impact” before the second half of 2025. 

Oil slipped, trimming some of Thursday’s 3.6% gain, which was triggered by news that Israel’s security cabinet was meeting to discuss retaliation against Iran.

Key events this week:

• JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
• US PPI, University of Michigan consumer sentiment, Friday
• Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 10:07 a.m. London time
• S&P 500 futures fell 0.1%
• Nasdaq 100 futures fell 0.2%
• Futures on the Dow Jones Industrial Average fell 0.1%
• The MSCI Asia Pacific Index was little changed
• The MSCI Emerging Markets Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1% to $1.0948
• The Japanese yen fell 0.1% to 148.79 per dollar
• The offshore yuan rose 0.2% to 7.0716 per dollar
• The British pound was little changed at $1.3071

Cryptocurrencies

• Bitcoin rose 1.6% to $60,680.51
• Ether rose 1.6% to $2,404.88

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.08%
• Germany’s 10-year yield advanced two basis points to 2.28%
• Britain’s 10-year yield advanced one basis point to 4.22%

Commodities

• Brent crude fell 1% to $78.58 a barrel
• Spot gold rose 0.4% to $2,640.41 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Natalia Kniazhevich, Richard Henderson and Divya Patil.

©2024 Bloomberg L.P.