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Frankfurt - US stocks fluctuated, after the S&P 500 capped a second straight weekly retreat, amid declines in oil while investors awaited a final batch of earnings reports and further clues on the health of the economy.
The S&P 500 rose less than 0.1% to 2 057.23 at 15:32, after back-to-back weekly losses for the first time since February. Crude erased gains amid Canadian wildfires that cut production by about 1 million barrels a day.
The main US equity benchmark snapped a three-day decline on Friday after worse-than-estimated payrolls data stoked speculation the Federal Reserve will adopt a slower pace in tightening monetary policy. Traders are pricing in only a 4% chance of higher borrowing costs in June, compared with 20% a month ago. December is the first month with even odds of an increase.
“We’re starting to see with Friday’s payrolls that the Fed will not raise rates in June, so at least that risk is gone,” said Jasper Lawler, a London-based market analyst at CMC Markets Plc. “Investors will be looking toward retail sales this week for further indications.”
Still, influential bond investors warn not to count out the Fed. Bill Gross, former manager of the biggest bond fund, said policy makers may act at their next meeting in June. Mohamed El-Erian, chief economic adviser at Allianz SE, said the Fed may move twice this year. Mark Kiesel at Pacific Investment Management and New York Fed President William Dudley echoed the comments.
The S&P 500 has fallen 2.2% through Friday since its April 20 peak, putting a brake on a 15% rise from the index’s 22-month low in February. Tepid first-quarter corporate results, particularly from technology giants such as Apple and Microsoft, as well as subdued economic indicators damped investor appetite for risky assets after the gauge approached its all-time high reached last May.
More than 85% of S&P 500 companies have already reported earnings this season, of which about three-quarters beat profit forecasts and more than half topped sales expectations. Results from Allergan, Walt Disney and Macy’s are due later this week.
Analysts have moderated their predictions for a decline in first-quarter earnings to 7.4%, from 9.5% at the start of April. According to one measure of corporate optimism, companies that forecast profit will exceed analyst estimates just outnumbered those that warn earnings will trail projections.
A pause in the drumbeat of bad news on earnings would be welcome by bulls who’ve watched stock swings widen and rallies die as share prices approached record levels reached 12 months ago.
Traders will also parse economic releases for clues on US growth prospects, including data on retail sales and jobless claims later this week.
Chicago Fed President Charles Evans said in a panel discussion in London today that the US central bank is “just being careful” by pausing in its campaign to raise rates, and that borrowing costs should increase later in the year if economic fundamentals remain sound. Minneapolis Fed President Neel Kashkari is scheduled to speak this afternoon.
