(Bloomberg) — Stocks pared gains as banks came back lower, with traders piling into some of the world’s largest technology companies that are seen by many on Wall Street as a kind of shelter in times of stress and economic uncertainties.
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The S&P 500 trimmed an advance that approached 2% as a gauge US financial heavyweights extended losses. A rally in megacaps like Apple Inc. and Microsoft Corp. put the Nasdaq 100 near the threshold of a bull market after a 20% surge from its December low. In the wake of the banking turmoil that has rattled markets around the globe and added to recession fears, the cohort of tech stalwarts that are flush with cash has largely outperformed this month.
Treasury Secretary Janet Yellen faces US lawmakers again Thursday, offering a fresh opportunity to explain the Biden administration’s stance on bank deposits after her remarks on the issue roiled financial markets Wednesday. She’s scheduled to appear before a House panel at 3 p.m. in Washington. Investors are looking for clarity on the readiness of regulators to backstop bank deposits after sudden outflows contributed to the collapse of multiple US regional lenders this month.
Shorter-dated Treasury yields were down once again, with swaps linked to policy meeting dates now showing the central bank benchmark ending 2023 around three quarters of a point below its new, post-decision level. Federal Reserve Chair Jerome Powell insisted Wednesday that rate cuts are not his “base case.”
“The push-and-pull between financial market stability and inflation that is receding more slowly than anyone would prefer will further complicate an already significant challenge for the Fed, increasing the risk of a policy misstep and keeping the door open for a potential recession on the horizon,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
In other corporate news, Block Inc. tumbled after Hindenburg Research said it’s betting on a decline in the stock, alleging the payments company led by Jack Dorsey facilitated fraudsters who took advantage of government stimulus programs during the pandemic. Block said it plans work to with the Securities and Exchange Commission and explore legal action against Hindenburg for the “factually inaccurate and misleading report they shared about our Cash App business.”
Bad Timing
Now hedge funds couldn’t have picked a worse time to turn bullish on the dollar.
After betting against the greenback for 13 straight weeks, speculators flipped to a net long position in the week ended March 14, according to data from the Commodity Futures Trading Commission. The shift came days just before the Fed tempered its language around how much additional policy tightening might be needed, sending the dollar sliding.
A gauge of the greenback is down for a sixth straight session — its longest losing streak since April 2021.
On the economic front, applications for US unemployment benefits unexpectedly eased for a second week, underscoring a still-tight job market in which employers are reluctant to reduce headcount. Sales of new homes unexpectedly rose in February after a downward revision to the prior month, suggesting the housing market is beginning to stabilize after a tumultuous year.
Elsewhere, the Bank of England pushed ahead with another interest rate increase despite turmoil in the banking sector, predicting the UK economy will avoid a recession for now and that inflation remains a risk. The pound rose, and investors priced in more certainty of at least one more rate hike later this year.
Read: EU Regulators to Rethink Liquidity After Credit Suisse Unravels
Key events this week:
Some of the main moves in markets:
Stocks
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The S&P 500 rose 0.8% as of 1:28 p.m. New York time
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The Nasdaq 100 rose 1.8%
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The Dow Jones Industrial Average rose 0.5%
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The MSCI World index rose 0.8%
Currencies
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The Bloomberg Dollar Spot Index fell 0.3%
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The euro rose 0.1% to $1.0870
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The British pound rose 0.2% to $1.2296
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The Japanese yen rose 0.4% to 130.97 per dollar
Cryptocurrencies
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Bitcoin rose 3.3% to $28,284.49
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Ether rose 4.9% to $1,822.73
Bonds
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The yield on 10-year Treasuries advanced two basis points to 3.45%
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Germany’s 10-year yield declined 13 basis points to 2.20%
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Britain’s 10-year yield declined nine basis points to 3.36%
Commodities
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West Texas Intermediate crude fell 1% to $70.20 a barrel
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Gold futures rose 2.4% to $2,013.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from John Viljoen, Angel Adegbesan, Isabelle Lee, Carly Wanna and Vildana Hajric.
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