U.S. stocks opened lower Monday as investors grew cautious at the start of a bumper week of central-bank meetings and corporate earnings.
The S&P 500 dropped 0.6% shortly after the opening bell, while the Dow Jones Industrial Average fell 106 points, or 0.3%. The Nasdaq Composite declined 0.8%.
Stock markets have tracked a volatile path higher in recent weeks, driven by signs of softening inflation and hopes that the Federal Reserve will continue to moderate—and eventually halt—its interest-rate increases. U.S. indexes registered solid weekly gains last week, with the S&P 500 adding 2.5%, the Nasdaq Composite jumping 4.3% and the Dow industrials rising 1.8%.
Investors are gearing up for another important week of corporate results, with earnings due from more than 100 members of the S&P 500 index. In tech,
and
report Tuesday,
parent
follows Wednesday, and the sector giants
Google parent
and
are all set to report Thursday.
Global bond yields rose, in turn pressuring valuations for high-growth technology companies, as a surprisingly strong inflation reading from Spain muddied the outlook for interest rates in the eurozone.
Government-bond yields in Europe and the U.S. rose Monday. The yield on the benchmark 10-year Treasury note climbed to 3.554% from 3.517% on Friday. Bond yields and prices move in opposite directions.
U.S. stock indexes have tracked a volatile path higher in recent weeks
Photo:
ANDREW KELLY/REUTERS
Fed officials are broadly expected to raise interest rates by a quarter of a percentage point when their two-day meeting concludes Wednesday, lowering the size of the increase for a second straight meeting. Officials are also likely to debate how much further they need to go in taming inflation before pausing rate rises.
Despite that, investors remain cautious about the economy. Determined to tame inflation, the Fed, under Chair
Jerome Powell,
is seen as unlikely to quickly begin lowering interest rates as it has done in the past. Some investors worry sustained high rates could drag the economy into recession.
“The market has had a flying couple of weeks. But as we get closer to the Fed meeting cautiousness is something that is certainly going to creep in,” said
Seema Shah,
chief global strategist at Principal Asset Management. “We will likely see Powell re-emphasizing that they are not at the end yet.”
The European Central Bank and the Bank of England are also both expected to raise interest rates this week, with policy decisions from both due on Thursday. Inflation in Europe has yet to show the sustained decline that has been witnessed in the U.S.
European bond yields rose Monday after inflation data from Spain—one of the first European economies to report consumer-price data this week—showed a surprise rebound, confounding investors’ expectations about a continent-wide downward trend in inflation and complicating the outlook for interest rates.
The yield on Germany’s 10-year bond rose to 2.288% while yields on benchmark bonds in Spain, France and Italy also rose.
“There is an emerging divergence between the Fed and the ECB,” said Charles Diebel, head of fixed income at Mediolanum International Funds. “The forward-looking inflation data continues to move south in the U.S. In Europe, it is clear that the data isn’t yet doing the same.”
In commodity markets, oil prices fell. Brent crude, the international oil benchmark, dropped 1.4% to $85.11 a barrel.
Overseas stock indexes diverged. In Europe, the Stoxx Europe 600 fell 0.4%, led by losses for technology companies.
Asian indexes were mixed, as markets in mainland China and Taiwan reopened following the Lunar New Year holiday. Moves ranged from a 2.7% loss for Hong Kong’s Hang Seng Index to a 3.8% gain for Taiwan’s Taiex index.
Write to Will Horner at william.horner@wsj.com
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
