Risk Rally Sputters as Bullish Investors Pause
World stocks snapped a five-day rally on Thursday as investors took a breather, while oil prices slumped as much as $3 per barrel on signals of higher U.S. supply and lackluster Chinese demand.
By 1748 GMT (12:48 p.m. EST), MSCI’s gauge of stocks across the globe edged down 0.18%, and shares on Wall Street were little changed.The S&P 500 index eked out marginal gains on Wednesday but managed to extend its winning streak to the eighth session.
The Dow Jones Industrial Average lost 0.3%, the S&P 500 and the Nasdaq Composite were barely changed.
The mood on Wall Street was not helped by a plunge in the shares of Cisco Systems and Walmart following underwhelming forecasts for demand. [.N]
Some analysts thought that equity markets were not likely to lurch sharply lower for now, despite recent sharp gains, as investors celebrate the prospect that U.S. interest rates might have peaked.
“Upside risks to inflation and downside risk to growth mean the risk-positive data flow is unlikely to last through 2024, but it’s not clear there will be sufficient data to refute the happy, if probably unsustainable, narrative before the end of the year,” analysts at Citi said.
That said, oil prices slumped almost $4 a barrel, with U.S. crude sliding 5% to $72.84 per barrel and Brent was at $77.32, down 4.8% on the day.
Oil prices are tumbling in part because U.S. crude stocks rose by 3.6 million barrels last week to 421.9 million barrels, government data showed on Wednesday, far exceeding analysts’ expectations in a Reuters poll. [EIA/S][O/R]
Over in Europe, the pan-European STOXX 600 index lost 0.72% from a one-month high.
The dollar index narrowed earlier losses and was flat, while the euro was up 0.12% at $1.08585. [USD/]
Dollar weakness benefited gold prices, which jumped 1.2% to $1,982.19 per ounce. [GOL/]
Indications of a cooling U.S. labor market weighed on Treasury yields. [US/] Benchmark 10-year notes were down 9.2 basis points to 4.443%, from 4.537% late on Wednesday.
The 2-year note was last was down 8.5 basis points to yield 4.8417%, from 4.916%.
“If you don’t get confirmation of the slowing economic direction from every single piece of data every single day, we risk running out of momentum on the big trades,” Societe Generale FX strategist Kit Juckes said. “Until we get to the point where rate cuts are just around the corner, everything is going to be very stop-start. The dollar sell-off is stop-start, the bond market rally is really stop-start and the equity market is all over the place.”
Germany’s 10-year bond yield dipped to a near two-month low of 2.579%, while sterling sank to a six-month low against the euro as dealers in London inched closer their predictions on when the Bank of England (BoE) will start cutting rates. [EUR/GVD][GBP/]
Many now think it might be as soon as May, although BoE policymaker Meg Greene warned that investors are missing the message that central banks have been pushing recently that interest rates will remain higher for longer.
“I think markets globally haven’t really clocked on to this,” Greene told Bloomberg Television, adding that the BoE was not talking about cutting rates.Among major movers, Nvidia shares rose 2.9% as local media reported the chip designer is planning to release three new chips for China.
Tesla fell 4.0% as HSBC initiated coverage of the EV maker with a “reduce” rating.
Walt Disney advanced 7.3% on a quarterly profit beat and as Hollywood actors reached a tentative agreement with major studios.
Five of the 11 major S&P 500 sectors traded higher, while healthcare shares were a drag, down 1.4%.
At 11:38 a.m. ET, the Dow Jones Industrial Average was down 21.79 points, or 0.06%, at 34,090.48, the S&P 500 was up 1.09 points, or 0.02%, at 4,383.87, and the Nasdaq Composite was up 19.14 points, or 0.14%, at 13,669.55.
Among other stocks, semiconductor firm Arm Holdings dropped 6.2% on a downbeat third-quarter sales forecast.
Advancing issues outnumbered decliners by a 1.07-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.42-to-1 ratio on the Nasdaq.