GLOBAL MARKETS-Stocks chop around, bond yields rise with Thursday's price data in focus

BY Reuters | TREASURY | 01/10/23 12:06 PM EST

(Updates prices, adds commentary, New York dateline)

By Sin?ad Carew and Amanda Cooper

NEW YORK, LONDON, Jan 10 (Reuters) -

Trading in Wall Street's major indexes was volatile on Tuesday with the S&P 500 flitting between red and green while Treasury yields rose as investors waited anxiously for U.S. inflation data due later in the week.

The U.S. dollar was little changed versus the euro and other major currencies, hovering around its weakest level in seven months as investors positioned themselves ahead of the December consumer price data due out on Thursday.

U.S. Treasury yields rose as investors braced themselves for how the inflation numbers might influence the Federal Reserve's interest rate hiking path as it has been prioritizing its fight against decades-high inflation.

The U.S. consumer price index (CPI) is expected to show December's headline inflation at 6.5% versus 7.1% in November.

"Generally the markets are waiting for this Thursday's CPI print coming out for December. It will probably be the biggest data point for the week and certainly give us some clarity around the direction of inflation," said Mona Mahajan senior investment strategist at Edward Jones.

"We're sensing a bit of sideways movement in the market today and probably we'll continue to get that."

The Dow Jones Industrial Average fell 4.1 points, or 0.01%, to 33,513.55, the S&P 500 lost 1.19 points, or 0.03%, to 3,890.9 and the Nasdaq Composite added 6.78 points, or 0.06%, to 10,642.43.

The pan-European STOXX 600 index lost 0.57% while MSCI's gauge of stocks across the globe shed 0.19%, after touching a more than 3 week high on Monday.

Signs of slowing wage inflation from the December U.S. jobs report released on Friday had provided some reassurance that inflation has peaked.

However, with consumer price increases still well above the central bank's target of 2%, two Fed officials on Monday had issued a stark reminder that interest rates will have to keep rising, no matter what investors have priced in.

San Francisco Fed President Mary Daly told the Wall Street Journal she would pay close attention to Thursday's data and both 25- and 50-basis point hikes were options for her. Atlanta Fed President Raphael Bostic said his "base case" was for no rate cuts this year or next.

On Tuesday, Fed Chair Jerome Powell avoided speaking about rate hikes in a speech in Sweden on Tuesday.

The dollar index rose 0.155%, with the euro up 0.01% to $1.0729.

The Japanese yen weakened 0.34% versus the greenback at 132.31 per dollar even after data showed a faster pick-up in Tokyo inflation that could prompt the Bank of Japan to tighten monetary policy more quickly.

Sterling was last at $1.2147, down 0.30% on the day.

In treasuries, benchmark 10-year notes were up 11.7 basis points to 3.634%, from 3.517% late on Monday.

The 30-year bond was last up 11.6 basis points to yield 3.7658%, from 3.65%. The 2-year note was last was up 8 basis points to yield 4.2786%, from 4.199%.

Oil prices were higher as commodity traders also waited for the data so they could gauge the Federal Reserve's plans for rate hikes and the potential impact on the economy and demand.

U.S. crude recently rose 0.76% to $75.20 per barrel and Brent was at $80.09, up 0.55% on the day.

In precious metals,

spot gold

added 0.1% to $1,873.30 an ounce. U.S. gold futures gained 0.11% to $1,874.80 an ounce.

(Additional reporting by Sin?ad Carew in New York, Amanda Cooper in London, Selena Li in Hong Kong; Editing by Muralikumar Anantharaman, Angus MacSwan Chizu Nomiyama, Alexandra Hudson)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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