Stocks sink to first quarterly loss in two years: Markets Wrap

(Bloomberg) — U.S. stocks fell at the close, closing their first quarter losing since the pandemic bear market, as Treasuries also pared the worst losses in at least five decades.

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Movements in most financial markets were muted on the last day of a quarter that brought twin threats from central banks bent on reining in runaway inflation and the war in Ukraine. The S&P 500 declined, taking its loss in the three months to almost 5%, the most since March 2020. The two-year Treasury yield gained after a 150 basis point rise that is the most since 1984. Ten-year rates fell, narrowing the spread to shorter maturities, as investors remain nervous about the threat of a tightening Federal Reserve triggering a recession. And oil tumbled but remained just above $100 a barrel in New York.

“The question is what kind of risk are we facing in the second quarter?” Rob Haworth, senior director of investment strategy at US Bank Wealth Management, said by phone. “We still have a long way to go.”

Stocks, sovereign bonds and corporate credit took a hit in the first months of the year amid concerns about slowing growth as central banks move to tackle inflation by withdrawing stimulus. Investors who hoarded commodities fared better, making massive gains on everything from oil to nickel to wheat. However, the increases have exacerbated price concerns and may prompt a sharper response from central banks.

“The recent rally has masked a lot of pain over the past three months,” wrote Matt Maley, chief market strategist at Miller Tabak + Co. Thursday’s drop marked the S&P 500’s 35th day down this year, the most. falls in the first trimester. since 1984, according to data compiled by Bloomberg.

Oil fell as US President Joe Biden ordered a massive release of US oil reserves while at the same time urging drillers to ramp up production. Stocks, meanwhile, fell as US inflation-adjusted spending declined last month as prices moderated demand.

Brent and West Texas Intermediate prices fell about 6%, and European natural gas fell as Russia said it would suspend gas contracts if buyers don’t pay in rubles.

“Quarter-end considerations aside, oil is very much in the spotlight,” Simon Ballard, chief economist at First Abu Dhabi Bank, wrote in a note to investors. Still, “all the usual suspects remain in play, keeping the market in check, including the specter of the Fed following an aggressive path of monetary policy normalization in the coming months.”

Markets now see a strong possibility that the Federal Reserve will raise rates by half a point at its May meeting. The US 2-year yield briefly surpassed the 10-year for the first time since 2019 on Tuesday, inverting another segment of the Treasury curve and reinforcing views that Fed rate hikes may cause a recession.

“This week’s brief reversal in the US bond market, combined with elevated volatility in Treasury options, is a warning that the risk of a US recession should not be ignored,” Lewis wrote. Grant, senior portfolio manager at Federated Hermes. “US bond markets are showing signs of stress. This is not reflected in equities, where the VIX remains dovish and US indices are trading above their pre-war levels. The bond market appears to have a better handle on potential risks.”

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Some key events to watch this week:

Some of the main movements in the markets:

Stocks

  • The S&P 500 fell 1.6% at 4:05 p.m. New York time

  • The Nasdaq 100 fell 1.5%

  • The Dow Jones Industrial Average fell 1.6%

  • MSCI World Index fell 1.4%

coins

  • The Bloomberg Dollar Spot Index rose 0.3%

  • The euro fell 0.8% to $1.1069

  • British Pound was little changed at $1.3143

  • The Japanese yen was little changed at 121.73 per dollar.

Captivity

  • The 10-year Treasury bond yield fell two basis points to 2.33%

  • Germany’s 10-year yield fell 10 basis points to 0.55%

  • Britain’s 10-year yield fell six basis points to 1.61%

raw Materials

  • West Texas Intermediate crude fell 6.4% to $100.90 a barrel.

  • Gold futures rose 0.1% to $1,941.80 an ounce.

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