(Bloomberg) — U.S. equities fluctuated around all-time highs and Treasuries rose as investors continued to debate the impact of resurgent inflation on monetary policy.
The S&P 500 swung between gains and losses after briefly surpassing its May 7 record closing level. The 10-year Treasury yield fell to the lowest in a month, with focus turning toward Thursday’s consumer-price data that may offer clues on how far the Federal Reserve can postpone a tapering of stimulus.
Biotechs stocks were among the biggest drags on the benchmark equity gauge, with Biogen Inc. retreating a day after it surged on U.S. regulatory approval of its Alzheimer’s disease drug. Gains in megacap techs including Amazon.com Inc., Apple Inc. and Alphabet Inc. helped offset those losses. Bitcoin slumped to a two-week low, with some analysts pointing to the recovery of Colonial Pipeline Co.’s ransom as evidence that crypto isn’t beyond government control.
U.S. equities have traded in a relatively tight range around record highs in recent weeks as investors try to balance the economic recovery and the Fed’s dovish stance against inflation concerns, high valuations and disparities in global Covid vaccine rollouts. Volatility has returned to the market ahead of the CPI report and the Fed’s rate decision next Wednesday.
“You look across the board and everything is more expensive,” said Brian Walsh, Jr., senior financial adviser at Walsh & Nicholson Financial Group. “It’s something we’re watching, but the Fed has continued to say they are gong to keep interest rates at bay regardless of the inflation data that comes in. You can only take them for their word and I think that’s what investors are doing.”
Global equities also are hovering around record highs, and Treasury yields have eased for three successive weeks. That suggests the Fed’s assurances are calming fears of Fed tightening for now. Yet on Tuesday, traders were exercising caution before the inflation data, pushing the dollar toward its first gain in three days.
“The tight trading ranges seen so far this month reflect the cautious mood in the market ahead of the inflation numbers,” said Fiona Cincotta, senior financial markets analyst at City Index. “Whilst the Fed reassures that this spike in inflation is temporary, policy makers will need to be out in their droves to calm the market. Delaying action or even inaction could cause economic disruption that the markets fear.”
In Europe, the benchmark Stoxx 600 gauge rose for a third day.
For market commentary, follow the MLIV blog.
Here are key events to watch this week:
Apple holds its annual Worldwide Developers Conference through June 11.European Central Bank decision on Thursday and press conference with President Christine Lagarde.Iran nuclear deal talks reconvene in Vienna Thursday.U.S. consumer price index on Thursday.Group of Seven leaders’ summit starts in Cornwall, England Friday.
These are some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 12:28 p.m. New York timeThe Nasdaq 100 was little changedThe Dow Jones Industrial Average was little changedThe MSCI World index was little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.1%The euro was little changed at $1.2180The British pound fell 0.3% to $1.4147The Japanese yen fell 0.2% to 109.48 per dollar
Bonds
The yield on 10-year Treasuries declined four basis points to 1.53%Germany’s 10-year yield declined three basis points to -0.22%Britain’s 10-year yield declined four basis points to 0.77%
Commodities
West Texas Intermediate crude rose 0.5% to $70 a barrelGold futures fell 0.2% to $1,895 an ounce
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