U.S. yield curve flattens, world stocks dip; focus on possible December hike

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 8, 2017.

By Caroline Valetkevitch

NEW YORK (Reuters) – The U.S. Treasury yield curve flattened to a two-and-a half month low and key world stock markets fell on Thursday, as investors assessed indications from the U.S. Federal Reserve that it may raise interest rates a third time this year.

The Fed, as expected, also laid out plans to begin the unwinding of a decade of aggressive monetary stimulus, but took a more hawkish than expected stance at this week’s meeting.

“The meeting was definitely more hawkish than what the market was anticipating,” said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle.

“We were definitely not pricing in another rate hike for this year,” Hurley said.

MSCI’s broad index of global stock markets was down 0.3 percent at 486.72.

The U.S. dollar earlier rose to a two-month high against the yen, while an index that measures the dollar’s strength against a basket of currencies dipped.

A Reuters poll late Wednesday of primary dealers, the banks authorized to transact directly with the Fed, showed that the Fed will resume rate hikes in December and raise borrowing costs three more times in 2018.

In Asia, the Bank of Japan kept its monetary spigots open at full.

The Treasury yield curve between five-year notes and 30-year bonds flattened to 92 basis points on Thursday, the lowest level since July 6. Intermediate-dated debt is more sensitive than longer-dated bonds to interest rate increases.

U.S. stocks pulled back from their all-time highs, though bank stocks cheered the prospect of higher interest rates which should help their profits. The S&P bank index was up 0.4 percent, adding to Wednesday’s gains.

The Dow Jones Industrial Average fell 17.83 points, or 0.08 percent, to 22,394.76, the S&;P 500 lost 3.67 points, or 0.15 percent, to 2,504.57 and the Nasdaq Composite dropped 23.08 points, or 0.36 percent, to 6,432.96.

Emerging markets shares were lower, with an index of emerging markets down 0.3 percent.

S&P Global became the second major rating agency this year to cut China’s credit score, citing worries about the country’s rising debt levels and the risks that posed for financial stability in the world’s second largest economy.FED,

China’s markets were already closed by the time it came but it kept the pressure on emerging markets stocks.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.69 percent lower.

Since the start of 2014, Reuters analysis shows that the big three rating agencies – S&P Global, Moody’s and Fitch – have racked up more than 155 emerging market downgrades between them, which averages out a roughly one a week.

The Japanese yen weakened 0.11 percent versus the greenback at 112.34 per dollar. The dollar index fell 0.29 percent.

Gold fell to its lowest in almost four weeks as investors continued to assess the Fed statement. Spot gold dropped 0.7 percent to $1,291.91 an ounce.

Oil prices were down slightly before a meeting of oil producers that could extend production limits.

U.S. crude fell 0.22 percent to $50.58 per barrel and Brent was last at $55.91, down 0.04 percent on the day.


(Additional reporting by Karen Brettell in New York, Marc Jones in London and Hideyuki Sano in Tokyo; Editing by Bernadette Baum)


U.S. stocks open higher after strong private jobs data

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., May 31, 2017. REUTERS/Brendan

By Sweta Singh

(Reuters) – U.S. stocks were higher on Thursday after better-than-expected private sector hiring showed that the labor market continues to strengthen, further boosting chances of a rate hike by the Federal Reserve later this month.

The ADP private sector employment report showed that 253,000 jobs were added in May, well above the 185,000 jobs estimated by economists polled by Reuters.

The report by payrolls processor ADP acts as a precursor to the much-awaited nonfarm payrolls data, due on Friday, that includes hiring in both the public and private sectors.

“I think the Fed has already made up its mind. Unless we have a real weak employment data tomorrow I think it’s a go-ahead for the Fed to raise rates in June,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

San Francisco Federal Reserve Bank President John Williams said on Wednesday he sees a total of three interest rate increases for this year as his baseline scenario, but views four hikes as also being appropriate if the U.S. economy gets an unexpected boost.

Forecasts from Fed officials suggest that a median of two more hikes are planned before the end of the year.

Traders priced in an 89 percent chance of a rate hike in the upcoming Fed meeting on June 14, according to Thomson Reuters data.

At 9:52 a.m. ET the Dow Jones Industrial Average was up 21.5 points, or 0.1 percent, at 21,030.15, the S&P 500 was up 6.16 points, or 0.25 percent, at 2,417.96 and the Nasdaq Composite was up 26.51 points, or 0.43 percent, at 6,225.03.    Seven of the 11 major S&P 500 sectors were higher, with the health and technology sectors leading the gainers.

The Institute for Supply Management is likely to report that its national manufacturing index slipped to 54.5 in May from 54.8 in April. The data is expected at 10:00 ET.

“We have a multitude of macro news coming out today and that will set the tone for the market’s direction … I think we are looking at another trying session,” Cardillo said.

Deere’s shares were up 1.9 percent at $124.74 after the farm and construction major said it would buy privately held German road construction company Wirtgen Group for $5.2 billion, including debt.

Goodyear Tire’s shares were up 5.7 percent at $34.03 after Morgan Stanley raised its rating to “overweight” from “underweight”.

Box Inc was up 3.9 percent at $19.40 after the cloud storage firm’s quarterly earnings edged ahead of Wall Street analysts’ expectations.

Advancing issues outnumbered decliners on the NYSE by 1,931 to 657. On the Nasdaq, 1,707 issues rose and 624 fell.

The S&P 500 index showed 28 new 52-week highs and 11 new lows, while the Nasdaq recorded 82 new highs and 70 new lows.

(Reporting by Sweta Singh in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D’Silva)

Wall St. opens higher as banks, discretionary stocks rise

A street sign for Wall Street is seen outside the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S. December 28, 201

By Yashaswini Swamynathan

(Reuters) – U.S. stocks rose on Wednesday, extending gains into the second trading day of the new year, helped by advances in consumer discretionary and bank stocks.

Investors are awaiting the minutes of the Federal Reserve’s Dec. 13-14 meeting in which it raised interest rates. The minutes are due to be released at 2:00 p.m. ET.

The central bank had cited strength in the labor market and a slight uptick in inflation among reasons for its move. Investors will pore over the minutes to assess policymakers’ view on the economy and the incoming administration.

With just over two weeks left before President-elect Donald Trump takes office, investors are waiting for the finer details of his proposed policies such as tax cuts and higher fiscal spending.

The S&P 500 financial sector rose 0.5 percent and provided the biggest boost to the broader index. Big U.S. banks are set on getting Congress loosen some banking regulations, seeing an opportunity in the incoming Republican-led administration.

The consumer discretionary index got a lift from Comcast, which rose 1 percent after Macquarie raised its price target to $76.

At 9:45 a.m. ET, the Dow Jones industrial average was up 37.61 points, or 0.19 percent, at 19,919.37, the S&P 500 was up 7.36 points, or 0.32 percent, at 2,265.19 and the Nasdaq Composite was up 21.93 points, or 0.4 percent, at 5,451.02.

Nine of the 11 major S&P 500 sectors were higher, led by gains in healthcare and utilities.

Shares of General Motors and Ford were up more than 3 percent after the automakers posted strong U.S. sales for December.

Agile Therapeutics lost 58 percent of its value in heavy trading and is set to open at a record low after the company provided an update on its contraceptive patch trial.

Advancing issues outnumbered decliners on the NYSE by 2,196 to 528. On the Nasdaq, 1,771 issues rose and 614 fell.

The S&P 500 index showed 10 new 52-week highs and no new lows, while the Nasdaq recorded 45 new highs and three new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty)

Rising gasoline, rents push U.S. inflation higher in September

A Shell gas station is shown in Encinitas, California

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices recorded their biggest gain in five months in September as the cost of gasoline and rents surged, pointing to a steady pickup of inflation that could keep the Federal Reserve on track to raise interest rates in December.

The Labor Department said on Tuesday its Consumer Price Index increased 0.3 percent last month after rising 0.2 percent in August. In the 12 months through September, the CPI accelerated 1.5 percent, the biggest year-on-year increase since October 2014. The CPI rose 1.1 percent in the year to August.

“The upward creep of prices weakens any argument against a rate increase in December,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York. “The economy is close to full employment and prices are starting to respond to that reality.”

Last month’s increase in the CPI was in line with economists’ expectations. However, underlying inflation moderated amid a slowdown in the pace of increases in healthcare costs after recent robust gains.

The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. That slowed the year-on-year increase in the core CPI to 2.2 percent following a 2.3 percent rise in August.

But with rents, which account for a larger share of the core CPI, recording their biggest increase in nearly 10 years, and wages pushing higher, economists cautioned against putting too much emphasis on last month’s weak reading.

The U.S. central bank has a 2 percent inflation target and tracks an inflation measure which is at 1.7 percent. Fed Vice Chair Stanley Fischer said on Monday that the U.S. central bank was “very close” to its inflation and employment targets.

“As inflation approaches 2 percent, the argument that the economy has more room to run becomes harder to make and we believe the Fed remains on track for a rate hike in December,” said John Ryding, chief economist at RDQ Economics in New York.

The Fed lifted its short-term interest rate last December and has held it steady since because of persistently low inflation.

The dollar was little changed against a basket of currencies, while prices for longer-dated U.S. Treasuries rose slightly. U.S. stocks rallied, cheered by better-than-expected quarterly earnings from UnitedHealth, Netflix and Goldman Sachs.


While the jump in overall inflation was also the result of last year’s lower energy prices dropping out of the calculation, it suggested firming domestic demand.

A 5.8 percent jump in gasoline prices accounted for more than half of the increase in the CPI last month. Americans also paid more for electricity, with prices posting their biggest gain since December 2014.

The price increases are bad news for retirees, with social security recipients only due to get a 0.3 percent cost of living adjustment increase next year. Households, however, got some relief from food prices in September, which were unchanged for a third straight month. The cost of food consumed at home declined for a fifth straight month.

Within the core CPI basket, housing costs rose further in September. Owners’ equivalent rent of primary residence increased 0.4 percent, the largest gain since October 2006, after rising 0.3 percent in August. Rents tend to be sticky and should keep core inflation supported.

Medical care costs rose 0.2 percent last month, the smallest increase since March, after surging 1.0 percent in August. The cost of hospital services was unchanged, while prices for prescription medicine rose 0.8 percent.

The government revised prices for prescription drugs from May through August this year as incorrect data had been used to calculate price changes. Prescription medicine accounts for about 1.4 percent of the CPI basket.

Consumers also paid more for grooming, motor vehicle insurance, tobacco and airline fares. However, prices for communication recorded their largest decline in two years, while heavy discounting by retailers pushed apparel prices down 0.7 percent. Prices for motor vehicles also fell.

“Inflation is moving up, showing this is not an economy that is undergoing serious demand-based weakness,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Wall Street dragged lower by Apple, oil prices

Traders work on the floor of the New York Stock Exchange

By Yashaswini Swamynathan

(Reuters) – U.S. stocks fell on Thursday morning, weighed down by a fall in Apple as well as a drop in energy companies after OPEC failed to agree on output policy.

Oil prices dropped about 2 percent and the energy index tumbled 1.13 percent. Major oil producers Exxon and Chevron were down about 1 percent.

Apple was down about 1.3 percent after Goldman Sachs cut its price target on the stock, citing lower growth expectations for the smartphone industry. The stock was the biggest drag on all three major indexes.

The European Central Bank kept its negative interest rates unchanged and President Mario Draghi said inflation would likely remain very low or negative in the next few months.

As well as uncertainty over the OPEC decision, contrasting data from the United States and abroad over the past two days led traders to lower their expectations of the Federal Reserve raising interest rates as soon as this month.

The ADP National Employment report on Thursday showed U.S. private payrolls increased a less-than-expected 173,000 in May. But, as the economy nears full employment, job creation would slow, said Mark Zandi, Moody’s Analytics’ chief economist.

The data comes ahead of the U.S. Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.

The number of Americans applying for unemployment benefits unexpectedly dropped last week, pointing to a tightening labor market.

“Obviously there are several major events that the market is going to focus on and could cause a bumpy ride for stocks today,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

At 9:45 a.m. ET the Dow Jones Industrial Average was down 44.07 points, or 0.25 percent, at 17,745.6.

The S&P 500 was down 5.36 points, or 0.26 percent, at 2,093.97 and the Nasdaq Composite was down 9.41 points, or 0.19 percent, at 4,942.84.

Eight of the 10 major S&P sectors were lower, led by the energy index.

Mining equipment maker Joy Global rose 13.5 percent after it reported a surprise adjusted profit for the latest quarter.

Cloud storage provider Box fell 9.1 percent to $11.64 after the company reported a slowdown in billings growth in the first quarter.

Declining issues outnumbered advancing ones on the NYSE by 1,674 to 957. On the Nasdaq, 1,198 issues fell and 1,049 advanced.

The S&P 500 index showed 13 new 52-week highs and no new lows, while the Nasdaq recorded 26 new highs and six new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)

Wall St. flat as earnings fail to excite investors

Wall Street

By Abhiram Nandakumar

(Reuters) – U.S. stock indexes were flat on Friday after poor quarterly reports from technology bellwethers Microsoft and Alphabet outweighed gains from steadying oil prices.

Microsoft was the biggest drag on all three major indexes.

Crude rose about 1 percent on signs of strong gasoline consumption in the United States. [O/R]

With recent economic data indicating a sluggish pace of economic growth globally and crude prices hovering near five-month highs, earnings have become a swing factor for stocks.

The S&P 500 has staged a sharp recovery from a steep selloff earlier this year and is inching toward its all-time high, helped by a recent rebound in oil, a cautious Federal Reserve and companies beating tempered expectations.

The index is up half a percent for the week, having posted gains on the first three days.

“We’re back to the every other day theory, bouncing around a little, but I don’t see too strong a sentiment either way,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“It’s still a very cautious environment,” Brown said, adding that the negative tone from the quarterly reports were expected.

At 9:42 a.m. ET, the Dow Jones industrial average was up 11.91 points, or 0.07 percent, at 17,994.43, the S&P 500 was down 1.52 points, or 0.07 percent, at 2,089.96 and the Nasdaq Composite was down 35.84 points, or 0.72 percent, at 4,910.05.

Eight of the 10 major S&P sectors were higher, but the index was under pressure by a 1.4 percent decline in the technology sector

Alphabet and Microsoft were down 3.7 and 6.5 percent respectively after both missed profit and revenue estimates.

S&P 500 companies are seen posting a 7.2 percent fall in first-quarter profit, according to Thomson Reuters I/B/E/S, and shares of companies failing to beat the already lowered expectations are getting hammered.

McDonald’s rose 0.7 percent to $126.63 after the company’s profit beat estimates.

General Electric was off 1.1 percent at $30.63 after it reported lower organic revenue.

Caterpillar shares were down 0.6 percent at $78.16 after its results.

Starbucks slipped 3 percent after missing sales expectations, while Visa was down 2.3 percent after it cut full-year revenue forecast.

Advancing issues outnumbered decliners on the NYSE by 1,885 to 761. On the Nasdaq, 1,460 issues rose and 740 fell.

The S&P 500 index showed six new 52-week highs and no new lows, while the Nasdaq recorded 19 new highs and six lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)