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Stocks slip, bonds sidle in subdued week ahead of holiday

Published 26/03/2024, 01:32 pm
© Reuters. A passerby walks past an electric monitor displaying various countries' stock price index outside a bank in Tokyo, Japan, March 22, 2023. REUTERS/Issei Kato/File Photo
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By Alden Bentley and Amanda Cooper

NEW YORK/LONDON (Reuters) - Wall Street turned modestly lower in late trade on Tuesday, mostly in sync with subdued global share market movements, while the yen hovered near 2022 intervention levels after more official Japanese jawboning to deter shorting of the currency since last week's monetary policy tightening.

Treasury yields barely moved, reflecting muted trading across asset classes ahead of Good Friday, when U.S. markets and many other financial centers will be closed.

The S&P 500 closed down 14.61 points, or 0.28%, at 5,203.58. the Dow Jones Industrial Average fell 31.31 points, or 0.08%, to 39,282.33, and the Nasdaq Composite fell 68.77 points, or 0.42%, to 16,315.70.

MSCI's gauge of stocks across the globe fell 1.02 points, or 0.13%, to 778.43.

"It's an interesting dynamic, and this holds every time we have a Fed meeting - the next week tends to have a quieter tone to it. Especially a holiday-shortened week like we have here, and the amount of data influence is going to be lighter," said Art Hogan, chief market strategist at B Riley Wealth in New York, referring to the Federal Reserve.

"That's attracting the sideways movement we've seen."

The pan-European STOXX 600 index rose 0.24%, and MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.25% higher 0.25%, at 535.59.

In the spotlight was the yen, which has been trading close to its weakest against the dollar since 1990, even after the Bank of Japan raised interest rates last week for the first time in 17 years.

The dollar ticked up 0.1% to 151.56 yen, facing the risk of Japan intervening to prevent further falls in the Japanese currency. Dollar/yen rose to 151.94 in October 2022, before intervention pushed it lower.

Japanese Finance Minister Shunichi Suzuki said on Tuesday he would not rule out any measures to cope with the yen's weakening, echoing a warning from Tokyo's top currency diplomat the previous day.

The dollar weakened 0.06% to 7.248 versus the offshore Chinese yuan, which was supported after a stronger-than-expected fixing of its trading band.

Markets were unsettled by a sharp drop in the yuan on Friday, after months of tight trading, and some speculate China is loosening its grip on the currency to allow it to fall.

"We've got changing sands in the FX market. You’ve got threat of intervention from Japan ... and from China. It’s good to see that they do actually care about the economy and they are willing to step in. It’s not quite the stimulus we want, but they are saying 'enough is enough now, we do need to worry about our deflation'," XTB research director Kathleen Brooks said.

A 14% decline in the yen's value over the last 12 months fed a surge in Tokyo's Nikkei index to record highs in recent days, even though it slipped 0.04% on Tuesday.

MIXED OUTLOOKS

Last Wednesday, the Federal Open Market Committee left U.S. interest rates where they were and the FOMC's median dot plot projections showed no change to the previous projection of three rate cuts this year, despite a strong economy and stubborn inflation.

Confusing the picture somewhat since, while Chicago Fed President Austan Goolsbee on Monday said he had pencilled in three rate cuts this year, Fed Governor Lisa Cook urged caution and Atlanta Fed President Raphael Bostic reiterated Friday remarks trimming his expectations to one cut.

U.S. interest rate futures price about three Fed rate cuts this year and about a three-in-four chance of the first cut in June.

U.S. yields edged up after a report showing orders for long-lasting U.S. manufactured goods increased more than expected in February, while business spending on equipment showed tentative signs of recovery, boosting the economy's prospects in the first quarter.

They retreated slightly after the Treasury auctioned $67 billion in five-year notes to solid demand.

The yield on benchmark U.S. 10-year notes was off 2.5 basis point at 4.228%. The 2-year note yield, which typically moves in step with interest rate expectations, was flat at 4.5868%.

The week's most important data, the February Personal Consumption Expenditure Price Index, comes at the end of the week, when hardly anyone is around to watch.

The federal government is open on Good Friday, but bond and stock markets are closed, so any trade reaction will come on Monday.

U.S. crude futures settled 0.4 % lower at $81.62 a barrel and Brent settled 0.58% lower at $86.25 per barrel.

Spot gold added 0.24% to $2,176.69 an ounce. U.S. gold futures gained 0.09% to $2,176.80 an ounce.

© Reuters. FILE PHOTO: The Charging Bull or Wall Street Bull is pictured in the Manhattan borough of New York City, New York, U.S., January 16, 2019. REUTERS/Carlo Allegri/File Photo

bitcoin fell 1.74% to $69,753.73. Ethereum declined 1.55% last fetching $3572.7.

(This story has been corrected to say bonds sidle, not slide, in the headline)

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