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Wall Street up, Treasuries surge as investors eye earnings, global growth

Wall Street up, Treasuries surge as investors eye earnings, global growth 1

By Pete Schroeder

WASHINGTON (Reuters) – Wall Street opened higher Monday while U.S. Treasury yields hit three-year highs as investors eyed corporate earnings and what Russia’s invasion of Ukraine could mean for global growth.

A significant cut to global growth expectations from the World Bank, paired with March weakness in China’s latest economic numbers injected some pessimism into U.S. markets, which opened Monday following a holiday-shortened previous week.

Corporate earnings are also expected to grab investors’ attention this week, with several major firms reporting quarterly numbers. Bank of America kicked off the week by reporting stronger first-quarter profits than expected.

Stocks were up in early trading, with the Dow Jones Industrial Average rising 0.22%, the S&P 500 climbing 0.25% and the Nasdaq Composite up 0.23%. Markets were closed in Australia, Hong Kong and many parts of Europe for the Easter holiday.

On Monday, the World Bank announced it was cutting its global growth forecast for 2022 by nearly a full percentage point due to the impacts of Russia’s invasion of Ukraine. The organization now expects economic growth of 3.2% in 2022, down from a prior 4.1% forecast.

China also reported Monday its economy slowed in March as consumption, real estate and exports were hit hard, worsening an outlook already weakened by COVID-19 curbs and the Ukraine war.

“Stocks continued to search for sustained upside momentum amid high inflation readings, interest rates on the rise, and dashed hopes for a cease fire in Ukraine,” said Chris Larkin, managing director at E*TRADE.

“While we’re facing turbulent times, consider how the market has recalibrated so far this year. The S&P 500’s recent pullback was relatively mild, but the VIX actually closed lower, which tends to suggest that volatility may have been priced in.”

TREASURY YIELDS CLIMB

The looming prospect of aggressive interest rate hikes from the Federal Reserve helped push U.S. Treasury yields to three-year highs.

The Fed is now expected to hike rates by 50 basis points at its May and June meetings, at least, as it looks to contain rapid inflation. Fed funds futures traders are expecting the Fed’s benchmark rate to rise to 1.28% in June and to 2.67% next February, from 0.33% now.

“Despite nascent signs that inflation could be easing and hawkish Fed bets being trimmed, a 50bps rate hike for May looks all but locked in,” wrote Deutsche Bank analysts in a note.

The benchmark 10-year note was last 2.8354%, after previously hitting 2.884% earlier on Monday, the highest since Dec. 2018.

Concerns over economic fallout helped push gold prices to a one-month high Monday, with safe-haven spot gold surging 0.92% to $1,992.71 an ounce.

The dollar also got a boost as a safe haven, with the dollar index, which tracks the greenback versus a basket of six currencies, rising 0.29%.

And outages at oil production facilities in Libya helped drive prices higher amid concerns of a tight global supply, despite some slowing Chinese demand.

Brent crude was last up 1.46% at $113.33 a barrel. U.S. crude was last up 1.33% at $108.37 per barrel.

 

(Reporting by Pete Schroeder; Editing by Hugh Lawson)

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