US equity markets reopened from the long Easter weekend on Monday, and stocks recovered from an early dip as investors weighed up the potential for more interest rate rises from the Federal Reserve. The S&P 500 closed 0.1% higher after a late pick-up, while the tech-heavy Nasdaq Composite ended the day flat despite dropping as much as 1.4% in early trading.
Monday marked the first opportunity traders had to respond to data released on Friday showing the continued strength of the US labour market. The US economy added 236,000 new positions last month, fewer than in February but not enough of a slowdown to discourage the central bank from making another rate rise to tamp down inflation. Futures markets are now pricing in an almost 75% chance of an interest rate increase at next month’s meeting.
Treasury markets had already sold off in response to the jobs data and prices slipped further on Monday. The yield on the benchmark 10-year note ticked up 0.04 percentage points to 3.42%, while the two-year yield added 0.04 percentage points to reach 4.01%. Yields rise when prices fall.
Nancy Curtin, chief investment officer at Alvarium Tiedemann, said she expected the Fed to lift rates one more time. However, she added that “It feels like a coin toss . . . a lot will depend on what [officials] see in consumer inflation data on Wednesday and [producer price inflation] on Thursday.” Economists expect consumer price inflation to dip to an annual rate of about 5.2% and a month-on-month rate of 0.3%, a level that Citi analyst Stuart Kaiser said would “mark modest deceleration . . . but remain too high for comfort and likely read negative for stocks”.
First-quarter earnings season also kicks off in earnest with results from a series of bellwether financial groups, including JPMorgan Chase. “What people will focus on is not so much the earnings themselves as the guidance — what CEOs are saying in terms of credit conditions,” Curtin said. “Lending by banks had already cut back a bit even before [the collapse of several banks last month].”
European markets remained closed for Easter Monday, and Hong Kong was also closed. Japan’s Topix stock index added 0.6%.
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