(Bloomberg) — U.S. stocks erased gains as Treasury yields edged higher in the final week of a dismal year for markets.
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Both the S&P 500 and Nasdaq 100 slipped. Shares of Tesla Inc. rose, snapping a seven-day losing streak on worries about falling demand. Treasury yields rose, while the dollar benchmark pared losses.
A still-cautious mood dampens hopes for a rally in the final trading week of 2022 after a rough year for financial markets. Global stocks lost a fifth of their value, the biggest year-on-year decline since 2008, while the global bond index fell 16%. The dollar gained 7% and the US 10-year yield rose to 3.80% from just 1.5% at the end of 2021.
“We believe investors have become overly pessimistic given where we are in the rate hike cycle,” wrote Nancy Tengler, CEO and chief investment officer at Laffer Tengler Investments. Following one of the fastest rate-hiking regimes in history, “we expect the economy to slow materially or enter a recession in 2023. We believe a severe downturn will be bearish for stocks, but given the resilience of the US economy and the tight labor market, we expect a slowdown or a shallow and short-lived decline. That could allow shares to rise in the second half of 2023.”
Seeking to revive Hong Kong as a financial hub, the city will end its latest major Covid rules, scrapping restrictions on vaccination checks and testing collections for travellers. However, while the easing of Covid restrictions could provide a boost to the global economy, there is concern about inflationary pressures that could prompt policymakers in the US to maintain tight monetary policy.
The Federal Reserve’s aggressive tightening policy is affecting the housing market. Unexpected US home sales fell for a sixth month in November to the second-lowest rate on record, data showed on Wednesday. Given that borrowing costs roughly doubled at the start of the year, home sales, and therefore prices, have been falling for months.
Elsewhere in the markets, the Stoxx Europe 600 index advanced, led by basic resources companies, as prices of industrial metals including copper rose. Most European bonds posted gains, with Germany’s 10-year yield down more than five basis points.
Oil fell amid tight liquidity as investors weighed the effects of a Russian export ban on buyers maintaining a price ceiling. Iron ore hit its highest since early August, while copper rose in New York as China’s easing of pandemic restrictions boosted the outlook for commodity demand in 2023.
This week’s main events:
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Initial US jobless claims Thursday
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The ECB published the economic bulletin on Thursday
Some major movements in the markets.
Shares
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The S&P 500 was down 0.2% as of 10:42 a.m. New York time.
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The Nasdaq 100 fell 0.2%
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The Dow Jones Industrial Average was little changed
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The Stoxx Europe 600 was little changed
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The MSCI World index fell 0.2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0638
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The British pound gained 0.4% to $1.2079
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The Japanese yen fell by 0.4% to 134.08 per dollar.
Cryptocurrencies
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Bitcoin fell 0.4% to $16,620.98
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Ether fell 1.5% to $1,192.59
Bonds
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The 10-year Treasury yield rose two basis points to 3.87%
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Germany’s 10-year yield fell one basis point to 2.51%
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UK 10-year yields rose six basis points to 3.70%
goods
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West Texas Intermediate crude fell 2.5% to $77.53 a barrel.
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Gold futures were down 0.7% at $1,809.50 an ounce.
This story was produced with the help of Bloomberg Automation.
– With assistance from Richard Henderson, Robert Brand and Peyton Forte.
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