GLOBAL MARKETS-US stocks lose steam on Fed caution and mixed earnings

BY Reuters | TREASURY | 04/17/24 11:30 AM EDT

(Updates to 11:04 EDT)

By Stephen Culp

NEW YORK, April 17 (Reuters) - U.S. stocks on Wednesday reversed earlier gains as crude prices dropped and investors weighed cautious U.S. Federal Reserve commentary and ongoing geopolitical strife against mixed quarterly earnings.

Benchmark U.S. Treasury yields paused near multi-month highs.

All three major U.S. stock indexes lost momentum in morning trading and last traded broadly flat, while tech shares pulled the Nasdaq slightly lower.

U.S. Federal Reserve Chair Jerome Powell declined to provide guidance on Tuesday regarding the timing and extent of expected interest rate cuts, but said policy needs to be restrictive for longer, dimming hopes for rate cuts this year.

"Investors tend to get into a momentum mode. They got way too optimistic about the speed of rate cuts. Now they're overly pessimistic," Jay Hatfield, CEO and portfolio manager at InfraCap in New York. "We believe the Fed is data dependent and by June, they'll be ready for a cut."

Hatfield expects a mid-year rally. "Until then, we expect range-bound trading as we're seeing today where there's a push-pull between interest rates versus a strong economy and strong earnings," he said.

The first-quarter reporting season gathers steam, with Travelers Companies (TRV) missing profit estimates and U.S. Bancorp (USB) providing a disappointing interest income forecast.

Tensions in the Middle East remained high as delicate Gaza ceasefire talks continued and the international community awaited Israel's threatened retaliation against Iran for its weekend missile attack.

The Dow Jones Industrial Average rose 2.53 points, or 0.01%, to 37,801.5, the S&P 500 gained 1.61 points, or 0.03%, to 5,053.02 and the Nasdaq Composite dropped 16.19 points, or 0.1%, to 15,849.06.

European shares were lifted by solid earnings from consumer products companies, but investors monitored developments in the Middle East.

The pan-European STOXX 600 index rose 0.23% and MSCI's gauge of stocks across the globe gained 0.03%.

Emerging market stocks rose 0.32%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.27% higher, while Japan's Nikkei lost 1.32%.

U.S. Treasury yields dipped, slowing a sell-off over the last week that pushed benchmark yields to their highest since November as the Fed reassessed the need for interest rate cuts.

Benchmark 10-year notes last rose 9/32 in price to yield 4.6222%, from 4.657% late on Tuesday.

The 30-year bond last rose 12/32 in price to yield 4.7334%, from 4.757% late on Tuesday.

The dollar hovered around 5-1/2 month highs against a basket of world currencies as investors processed the notion the Fed's expected rate cutting cycle is on hold.

The yen hovered near 34-year lows, keeping intervention watchers on high alert.

The dollar index rose 0.02%, with the euro up 0.21% to $1.0639.

The Japanese yen strengthened 0.06% versus the U.S. dollar at 154.64, while Sterling was last trading at $1.2454, up 0.24% on the day.

Oil prices dipped as high U.S. commercial inventories and expectations of a possible fall in demand as a result of weaker economic data from China, offset concerns ongoing geopolitical turmoil could disrupt supplies.

U.S. crude fell 0.71% to $84.75 per barrel and Brent was last at $89.19, down 0.92% on the day.

Gold rose in opposition to the dollar, nudging closer to record-high levels as risks that the Middle East crisis could spread attracted investors to the safe-haven metal.

Spot gold added 0.4% to $2,392.83 an ounce.

(Reporting by Stephen Culp; Additional reporting by Tom Wilson in London; editing by Barbara Lewis)

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.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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