NEW YORK ⸺ Wall Street’s S&P 500 index ended lower on Tuesday and a gauge of global equities was close to flat as investors awaited the Federal Reserve and other central banks meetings this week, where regulators will indicate if they will retain policies supporting a post-pandemic recovery.
U.S. stocks retreated late in the session, with the Nasdaq shedding more than a 1% gain, as yields on longer-maturity U.S. Treasury bonds ticked up, nipping investor enthusiasm for tech-stocks that are high growth but wary of rising inflation.
The U.S. dollar edged up against the euro and commodity currencies such as the Australian and New Zealand dollars as the two-day Fed meeting kept trading from being volatile..
But oil prices fell for a third day after Germany, France and other European countries suspended use of AstraZeneca’s vaccine, threatening economic growth and fuel demand, and tarnishing roll-outs as a pillar for a global recovery.
Speculation about what the Fed will say on Wednesday at the end of its two-day meeting kept markets mostly range-bound.
“The hope out there, for at least some investors, is they do an Operation Twist – buying long-term bonds and selling short bonds to help the economy,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
The Nasdaq rose to a two-week high on a rebound in tech stocks at the heart of February’s sell-off. MSCI’s benchmark for global equity markets, which is heavily weighted to the big U.S. technology firms, advanced 0.14% to 677.96.
After the coronavirus pandemic, demand will increase further for technology stocks, according to Johan Grahn, head of ETF strategy at AllianzIM in Minneapolis.
“As long as technology is solving real problems for people, there will continue to be a market for these types of companies,” Grahn said. “There will be more demand for technology solutions across the board.”
European stocks rose after an upbeat forecast from German carmaker Volkswagen prompted a rally in the automobiles sector. The broad FTSEurofirst 300 index rose 0.8%, closing in on its record peak of February 2020, while the regional autos sector jumped 2.1% to its highest level since June 2018.
On Wall Street, the Dow Jones Industrial Average fell 0.39%, the S&P 500 lost 0.16% and the Nasdaq Composite added 0.09%.
Euro zone government bonds held ground as caution set in before the Fed meeting.
Longer-term U.S. Treasury yields initially slipped as the market looked ahead.
The 10-year U.S. Treasury note rose 0.4 basis points to yield 1.6232%. Yields on the benchmark last week hit 1.642% on expectations of rising inflation.
The Fed is targeting maximum employment and higher inflation expectations, and will do whatever it can to get higher inflation, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York.
“This is what is motivating the sell-off in the 10-year note, and there are a lot of people who are just basically coming around to recognizing that,” Ricchiuto said.
Fed policymakers are expected to forecast the U.S. economy will grow in 2021 by the fastest rate in decades as it recovers from a coronavirus-stricken 2020.
The Bank of England also meets this week, on Thursday, and the Bank of Japan wraps up a two-day meeting on Friday.
The outlook for post-pandemic recoveries continued to diverge between the United States and Europe.
President Joe Biden’s order to make vaccinations available to all adults by May 1 contrasted with stuttering roll-outs in Germany, France and elsewhere, where use of the AstraZeneca vaccine has been suspended amid concern over possible serious side-effects.
In currencies, the dollar held small gains from overnight, with caution evident ahead of the central bank meetings.
The dollar index rose 0.059%, with the euro down 0.22% to $1.1902.
The Japanese yen strengthened 0.09% versus the greenback at 109.01 per dollar.
Gold edged lower, pressured by a stronger dollar. U.S. gold futures settled up 0.1% at $1,730.90.
Europe’s medicines watchdog said the benefits of the AstraZeneca vaccine outweigh its risks, but investors worry the slow pace of vaccinations in the European Union could dampen both the recovery and fuel demand.
Brent crude futures settled down 49 cents at $68.39 a barrel and U.S. crude futures fell 59 cents to settle at $64.80 a barrel.
Reporting by Herbert Lash with additional reporting by Ritvik Carvalho in London and by Kevin Buckland and Kane Wu in Tokyo; Editing by Mark Potter and Mark Heinrich; Reuters