(Bloomberg) — The world’s biggest bond market came under pressure, with Wall Street gearing up for another jumbo-sized sale of Treasuries that will help determine whether a turning point is in sight after this year’s selloff.
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Treasuries fell ahead of a $70 billion auction of five-year notes. While demand for a massive two-year debt sale in the previous day was rock solid, many traders are unsure about the market’s ability to absorb all that supply — also considering the more hawkish Federal Reserve signals earlier this month.
“On net, we’re biased for a solid reception — although we suspect there may need to be some intraday cheapening to bring similar demand to that seen at the two-year auction,” said Ian Lyngen and Vail Hartman at BMO Capital Markets.
US 10-year yields rose five basis points to 4.65%. The S&P 500 halted a two-day rally. Meta Platforms Inc. dropped just hours away from its results. Tesla Inc. surged 11% after chief Elon Musk vowed to launch less-expensive vehicles. The yen weakened beyond 155 per dollar, fueling intervention jitters.
Interest rates staying elevated longer, along with economic uncertainty and geopolitical turmoil have lessened the appeal of some of the stock market’s cheapest strategies.
Investors this month have pulled some $200 million out of value based exchange-traded funds, according to data compiled by Bloomberg Intelligence. In contrast, growth stocks have attracted more than $3 billion in inflows — despite a shaky stock market that’s raised concerns of more downside to come. That diminished interest in cheap stocks comes on the heels of lackluster performances of common value products.
Meantime, a JPMorgan Chase & Co. indicator is flashing a resounding buy signal in US stocks, after it hit a threshold that typically precedes better-than-average gains.
The bank’s US Tactical Positioning Monitor hit a level that reflects an “attractive set-up” for the S&P 500, according to a team led by Andrew Tyler, JPMorgan’s head of US market intelligence. The stock gauge has historically gained around 3% in the subsequent 20 days after a similar four-week change in positioning, compared to a roughly 1% gain in all periods, according to the note.
To Katrina Dudley at Franklin Templeton, valuations are fair — therefore companies need to continue to deliver on earnings growth.
“For the market overall, we’ll be watching guidance for the remainder of the year closely,” said Matt Palazzolo at Bernstein Private Wealth Management. “While it’s good to know how companies did from January to March — it’s more important now to have a sense for managements’ expectations for the balance of the year.”
Corporate Highlights:
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Boeing Co. Chief Executive Officer Dave Calhoun said the embattled planemaker is making progress toward turning around its manufacturing and that it will hit its mid-decade cash-flow goal, even after reporting a major outflow in the first three months of the year it slows output
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B. Riley Financial Inc.’s auditors signed off on its annual report, while flagging concerns about weak internal controls.
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Amazon.com Inc. and Microsoft Corp.’s investments into artificial intelligence startups will get deeper scrutiny from the UK’s antitrust watchdog.
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AT&T Inc. beat analysts’ estimates for profit in the first quarter as it added more wireless phone customers than expected.
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Biogen Inc. reported first-quarter profit that beat expectations as the biotech giant’s new Alzheimer’s drug Leqembi gained traction and cost cuts took hold.
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Visa Inc. reported a quarterly profit that beat Wall Street predictions as US credit-card spending climbed.
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Humana Inc. pulled its guidance for next year amid mounting pressures in its Medicare business.
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Hasbro Inc. reported first-quarter earnings that beat estimates, a promising sign for the company’s turnaround efforts.
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Mattel Inc. reported a smaller-than-expected first-quarter loss, benefiting from fast sales of its Hot Wheels miniature cars and lower costs.
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Citigroup Inc. turned bearish on Molson Coors Beverage Co., expecting sales trends will weaken as benefits from last year’s Bud Light boycott fade.
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SunPower Corp. will eliminate almost one-third of its workforce as the company copes with a prolonged slump in the rooftop solar business.
Key events this week:
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US GDP, wholesale inventories, initial jobless claims, Thursday
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Microsoft, Alphabet, Airbus earnings, Thursday
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Japan rate decision, Tokyo CPI, inflation and GDP forecasts, Friday
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US personal income and spending, PCE deflator, University of Michigan consumer sentiment, Friday
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Exxon Mobil, Chevron earnings, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.3% as of 12 p.m. New York time
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The Nasdaq 100 was little changed
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The Dow Jones Industrial Average fell 0.4%
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The Stoxx Europe 600 fell 0.4%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index rose 0.2%
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The euro fell 0.1% to $1.0687
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The British pound fell 0.1% to $1.2432
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The Japanese yen fell 0.2% to 155.12 per dollar
Cryptocurrencies
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Bitcoin fell 2.7% to $64,547.66
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Ether fell 1.1% to $3,172.99
Bonds
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The yield on 10-year Treasuries advanced five basis points to 4.65%
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Germany’s 10-year yield advanced nine basis points to 2.59%
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Britain’s 10-year yield advanced nine basis points to 4.33%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alexandra Semenova and Carly Wanna.
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