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London - US stocks fell as commodity shares shadowed a slide in oil, with the Standard & Poor’s 500 Index on track to halt a streak of five weekly gains that had wiped out all its 2016 losses.
The S&P 500 fell 0.7% to 2 023.45 at 15:32, on the way toward a 1.3% drop this holiday- shortened week after rising to a 2016 high on Monday.
“The market is seeing a little bit of a pause in momentum,” said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180bn at Stifel Nicolaus & Co. “Now we’re looking ahead at what drives us beyond what central-bank actions have been able to curry so far. We don’t really have a catalyst right now.”
The S&P 500 rallied as much as 12% from a February 11 low, bolstered by improving economic data, rising crude prices and support from global central-bank policy. There are signs those gains are losing momentum after back-to-back declines in the lightest trading this year and the dollar’s strongest rally since November. US markets will be closed tomorrow for the long Easter weekend.
The main US equity benchmark has still mostly recovered from a worst-ever start to the year spurred by concern over China’s slowdown and a rout in oil. It was down less than 0.5% for the quarter through Wednesday - versus 11% six weeks ago - and is heading for its biggest monthly advance since October. The index is among the top three best performers this year out of developed markets tracked by Bloomberg.
The Federal Reserve last week helped send stocks to 2016 highs after signaling a slower pace of interest-rate increases, amid risks posed by weak growth and market turbulence overseas. The dovish message was tempered this week as some Fed officials suggested a move higher could still come at any meeting, depending on progress in economic data.
Reports today were mixed, with orders for durable goods falling in February for the third time in four months, underscoring lingering softness in US capital investment. Separately, filings for unemployment benefits last week rose less than forecast as the number of dismissals stayed consistent with a firm labor market.
St. Louis Fed President James Bullard said today the central bank could be getting close to raising rates again. In a Bloomberg interview yesterday, Bullard said policy makers should consider lifting rates at their next meeting amid a broadly unchanged economic outlook and prospects of inflation and unemployment exceeding targets.
Traders are pricing in only an 8% chance for an April move and a 39% probability for a boost in borrowing costs at the central bank’s June meeting. Odds for June rose as high as 54% before last week’s gathering amid improving data and the rebound in equities.
Quarterly earnings will also soon be back in focus when Alcoa unofficially kicks off the reporting season on April 11. Profit at S&P 500 companies probably slumped 9.4% in the first three months of the year, according to analysts’ estimates.
“We’ve had a pretty substantial rebound across the board, and now there’s the feeling things were getting a bit overdone,” said Steven Santos, a broker at Banco de Investimento Global SA in Lisbon. “Markets will be vulnerable to declines from here, triggered by expectations that the stronger US economy demands more hikes from the Fed. It’s all about dollar strength, lower commodities and weaker stocks all over again.”
