Stocks Fall With Bonds as Traders Look for Auctions: Market Closed

(Bloomberg) — Stocks fell while Treasury yields and the dollar rose, as renewed concerns that U.S. interest rates will stay high longer weighed on markets.

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US futures fell 0.6%, while Europe’s Stoxx 600 fell by the same amount. ConocoPhillips sank 2.5% in premarket trading after agreeing to acquire Marathon Oil Corp. After spiking on Tuesday, 10-year Treasury yields rose two basis points. Yields on German bonds with a similar maturity reached their highest level since November.

Resilient US data and aggressive statements from the central bank are pushing back hopes of interest rate cuts, putting the focus on key inflation numbers later in the week. After weak demand for US note sales on Tuesday helped boost yields, traders will be watching the latest auction later today, this time for seven-year debt.

“The risk of higher bond yields for longer periods is affecting equity valuations and short-term pressure appears to be a given,” said Leonardo Pellandini, equity strategist at Bank Julius Baer. “However, with inflation expectations moderating and interest rate cuts coming soon, we believe markets can continue to rise.”

Despite Wednesday’s declines, the Stoxx 600 is on track for a 2.1% gain for the month, while the S&P 500 was up 5.4% at Tuesday’s close. Much of this recovery is due to technological megacaps and the artificial intelligence frenzy.

Hedge fund exposure to so-called Magnificent Seven companies is at a record high since Nvidia Corp.’s estimate-beating profit. last week, according to prime brokerage Goldman Sachs Group Inc.. The companies now represent about 20.7% of hedge funds’ total net exposure to U.S. individual stocks.

Fed favorite

On Friday, the Fed’s preferred inflation indicator will be released – the personal consumption expenditures index. Economists expect the PCE deflator to have risen at an annual rate of 2.7% in April, the same as in March.

“A potential banana peel is that large negative surprises in inflation could now raise the idea that the US economy may not be in as strong a position as previously expected – i.e., ‘bad news is bad news’,” Geoffrey Yu , senior strategist at Bank of New York Mellon.

Fed Chairman Jerome Powell and his colleagues have stressed the need for more evidence that inflation is on a sustained path toward its 2% target before cutting the benchmark interest rate.

The story continues

Fed’s Kashkari Says Interest Rate Hikes Not Completely Ruled Out

Brent crude rose 0.7% to $84.80 per barrel as another attack in the Red Sea raised geopolitical tensions in the Middle East ahead of the OPEC+ meeting at the weekend. West Texas Intermediate rose above $80 per barrel.

Corporate Highlights:

• ConocoPhillips agreed to acquire Marathon Oil Corp. in an all-stock deal that valued the company at about $17 billion, extending a major buying spree among the biggest players in the U.S. oil and gas industry.

• Anglo American Plc said it will no longer give BHP Group time to commit to a takeover bid, threatening to end a $49 billion search for the world’s biggest mining company.

• Royal Mail’s parent company has agreed to a £3.6 billion ($4.6 billion) takeover by Czech billionaire Daniel Kretinsky, setting the stage for a political battle over future ownership of the British postal service.

• Lenovo Group Ltd. plans to sell $2 billion in zero-coupon convertible bonds to Saudi Arabia’s sovereign wealth fund, part of a broader strategic pact with the tech-hungry kingdom.

Main events this week:

• Fed Beige Book, Wednesday

• Fed’s John Williams speaks on Wednesday

• Eurozone economic confidence, unemployment, consumer confidence, Thursday

• US initial unemployment claims, GDP, wholesale inventories, Thursday

• Fed’s John Williams and Lorie Logan Speak Thursday

• Japan unemployment, Tokyo CPI, industrial production, retail sales, Friday

• China’s official manufacturing and non-manufacturing PMI for Friday

• Eurozone CPI, Friday

• US Consumer Income, Spending, PCE Deflator, Friday

• Fed’s Raphael Bostic speaks on Friday

Some of the main movements in the markets:

Actions

• S&P 500 futures were down 0.6% at 8 a.m. New York time

• Nasdaq 100 futures fell 0.6%

• Dow Jones Industrial Average futures fell 0.6%

• The Stoxx Europe 600 fell 0.7%

• The MSCI World index fell 0.3%

Coins

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was little changed at $1.0852

• The British pound was little changed at $1.2751

• The Japanese yen was little changed at 157.27 per dollar

Cryptocurrencies

• Bitcoin fell 0.8% to $67,723.91

• Ether fell 0.5% to $3,809.36

Titles

• The yield on the 10-year Treasury note rose two basis points to 4.57%

• Germany’s 10-year yield rose six basis points to 2.65%

• Britain’s 10-year yield rose eight basis points to 4.36%

goods

• West Texas Intermediate crude rose 0.7% to $80.42 a barrel

• Spot gold fell 0.8% to $2,341.50 an ounce

This story was produced with help from Bloomberg Automation.

–With assistance from Rob Verdonck, Tassia Sipahutar, Allegra Catelli and Winnie Hsu.

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