Stocks struggle to find direction after rally

Stocks struggled to maintain momentum in the wake of another record-breaking session on Wall Street, as a rally in Europe took a breather despite dovish comments from policy makers.

Futures on the S&P 500 and Nasdaq 100 were little changed after the indexes clocked up gains of more than 1% in the wake of an inflation reading that did little to alter traders’ conviction that the Federal Reserve will shift to cutting interest rates this year. Treasury yields were little changed while bonds yields across Europe ticked lower.

Traders held on to Fed rate cut bets for this year even after US inflation came in higher than expected on Tuesday. Futures are pricing in nearly 70% odds that the central bank will start easing in June and enact at least three quarter-point cuts over the course of 2024. Policymakers next gather March 19-20, where investors will key into the Federal Open Market Committee’s quarterly forecasts for rates, including whether fresh employment and inflation figures have prompted any changes.

“It’s going to be hard for the Fed not to be hawkish in the next meeting as the fight against inflation clearly isn’t won yet,” said Justin Onuekwusi, chief investment officer at wealth manager St. James’s Place. “That print does make you sit up and be alert of the risk inflation remain stubbornly high and that has massive feed-across right across portfolios. Markets may be underestimating impact of sticky inflation as they are still aggressively pricing a June rate cut.”

The Stoxx Europe 600 index posted a modest advance led by retailers and utilities. Among individual movers, Zalando SE soared after the online fashion retailer exceeded profit expectations and posted upbeat forecasts. BNP Paribas SA climbed after pledging to return $21 billion to shareholders over three years. Pipe maker Geberit AG declined after underwhelming earnings.

The European Central Bank is also poised to start rate cuts soon, with Governing Council member Martins Kazaks saying on Wednesday reductions could come “within the next few meetings.” Bank of France Governor Francois Villeroy de Galhau said borrowing costs may be cut in the spring, with June more likely than April for a first move.

In other markets, oil advanced after four days of losses as an industry report pointed to shrinking US crude stockpiles, offsetting wavering OPEC cuts. Gold held a decline that snapped a record-breaking run of gains after the hotter-than-expected US inflation print.

Key events this week:

• Eurozone industrial production, Wednesday
• ECB Governing Council member Yannis Stournaras speaks, Wednesday
• Volkswagen, Adidas earnings, Wednesday
• US PPI, retail sales, initial jobless claims, business inventories, Thursday
• China property prices, Friday
• Japan’s largest union federation announces results of annual wage negotiations, just ahead of Bank of Japan policy meeting, Friday
• Bank of England issues inflation survey, Friday
• US industrial production, University of Michigan consumer sentiment, Empire Manufacturing, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 5:59 a.m. New York time
• Nasdaq 100 futures fell 0.1%
• Futures on the Dow Jones Industrial Average were little changed
• The Stoxx Europe 600 rose 0.2%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0923
• The British pound fell 0.1% to $1.2776
• The Japanese yen fell 0.2% to 147.99 per dollar

Cryptocurrencies

• Bitcoin rose 3.2% to $73,340.88
• Ether rose 2.6% to $4,052.09

Bonds

• The yield on 10-year Treasuries was little changed at 4.16%
• Germany’s 10-year yield declined two basis points to 2.31%
• Britain’s 10-year yield advanced one basis point to 3.96%

Commodities

• West Texas Intermediate crude rose 1.3% to $78.54 a barrel
• Spot gold was little changed

This story was produced with the assistance of Bloomberg Automation.