Treasury yields pushed higher following last week’s equity market bounce after a historic string of weekly losses. The Dow Jones Industrial Average and the S&P 500 each eked out gains in May, while the Nasdaq Composite fell for a second straight month.
Stocks bounced sharply last week, with the Dow Jones Industrial Average rising 6.2% to snap a run of eight straight weekly losses — its longest since 1932. The S&P 500, which earlier this month came within a whisker of the arbitrary 20% pullback threshold that marks a bear market, rose 6.6% last week for its biggest weekly gain since March 2020, while the Nasdaq Composite, which fell into a bear market earlier this year, rose 6.8%.
In May, the Dow and S&P 500 each eked out a gain of less than 0.1% while the Nasdaq fell 2.1%.
Federal Reserve policy was also top of mind for investors as U.S. President Joe Biden and Fed Chair Jerome Powell met on Tuesday to discuss inflation, which Biden said ahead of the meeting was his "top priority."
This was after Fed Governor Christopher Waller said on Monday the U.S. central bank should be prepared to raise rates by a half percentage point at every meeting from now on until inflation is decisively curbed.
*On U.S. exchanges 15.52 billion shares changed hands on Tuesday, compared with the 20-day moving average of 13.25 billion.*
Treasuries extended their slump in New York, driving the yield on the benchmark 10-year note up by the most in more than three weeks, as renewed inflation concerns and economic data supported expectations for multiple Federal Reserve hikes in coming months.
Intermediate-dated benchmarks led the decline, with yields on five-, seven-and 10-year Treasuries rising by around 12 basis points and they were near those peaks late in New York. The moves were spurred by hawkish comments from Fed Governor Christopher Waller and gained steam after stronger-than-expected reports on US consumer confidence and Chicago-area business conditions.
*Oil’s rally fizzled following a report that OPEC members are exploring the idea of exempting Russia from its oil-production deal, which could open the door for other producers to pump more oil.*
*West Texas Intermediate futures in New York s7hed nearly all of its gains to settle under $115 after earlier rising almost $5. Exempting Russia from oil-production targets could potentially pave the way for Saudi Arabia, the UAE and other producers in the cartel to pump more crude, the Wall Street Journal reported.*
*Euro-zone consumer prices jumped 8.1% to a record from a year earlier in May, exceeding the 7.8% median estimate in a Bloomberg survey. Treasury yields climbed across the curve, joining the selloff in German bunds and European bonds. The dollar advanced.*
*What drove markets?*
In the final day of the month, the bounce from recent lows appeared to be stalling.
Federal Reserve Chair Jerome Powell is expected to meet President Joe Biden in a rare Oval office meeting on Tuesday to discuss inflation ahead of US payroll numbers later this week.
*Fears central-bank rate hikes may tip the economy into a recession are keeping investors watchful as rising food and energy costs squeeze consumers. May saw nearly unprecedented volatility in stocks as the S&P 500 plunged more than 3% three different times and capped its longest streak of weekly losses since 2001 only to surge at the month’s end.*
*The advances come amid skepticism about whether the market is near a trough and as volatility stays elevated. Swaps show traders have almost fully priced in two half-point rate increases in June and July, with even odds of a third such hike in September.*
*When you throw-in the likelihood that earnings estimates are going to have go be cut in a significant way as we move through the summer, it emboldens our view that the stock market will have to see lower-lows before the ultimate bottom for this decline is reached.*
By: via @AlliesFin Serve Stock Market
