Stocks Meander On Wall Street, Yen Jumped 1% On Rate Path Worries

Barry Adams
10 Apr, 2023
New York City

Stocks lacked direction on the first day of trading this week as investors await corporate earnings and inflation data this week.

Market sentiment reverted to recession worries after three months rebound.  

Labor market conditions suggest that the U.S. economy is likely to add more than 2 million net new jobs in 2023, if the current sentiment carries through the second-half. 

The labor market health is also associated with wage growth, which feeds to inflation, but wage increases have been lagging the overall inflation and is not the key driver of inflation. 

The current inflation is driven by corporations raising prices to cover rising input costs and the desire to maintain or expand profit margins. 

Last week, four separate reports on the labor market showed that the U.S. economy is still creating new jobs but at a slower pace and labor market conditions are tight. 

Investors are hoping that the Federal Reserve will be able to carry out the delicate job of keeping the economy humming at just the right pace while managing to cool inflation to lower levels. 

While inflation has been cooling in the last four months, investors are hoping that the Federal Reserve will slow its future rate hikes or even pause after the next rate increase in May. 

After a long weekend in today's session investors worried that slowing labor market expansion may forecast a rolling recession and despite the moderating price increases overall inflation is still significantly higher than the Fed's target rate. 

Investors are also awaiting the release of earnings from banks later in the week and JP Morgan Chase, Wells Fargo and Citigroup are scheduled to report earnings on Friday. 

In addition, investors are looking forward to the release of consumer price inflation data on Wednesday followed by the release of wholesale price inflation on Thursday. 

In overseas trading, the yen jumped as much as 10% after the new Bank of Japan governor Kazuo Ueda stressed the importance of keeping the current monetary policy. 

Ueda in his inaugural speech after taking over the leadership role at the central bank also noted that monetary policy changes should not be delayed until it is too late. 

Japan has been pursuing ultra loose monetary policy of near zero percent interest rate since 2013 under the former governor Haruhiko Kuroda, but inflation failed to rise above 2% after briefly crossing the level in 2014.  

For nearly a decade, Japanese corporations and investors have been chasing yields abroad and investing in government securities issued by the U.S, Holland and Brazil. 

But Japanese investors suffered massive losses in the U.S. Treasury securities in 2022 after the U.S. Federal Reserve lifted rates seven times in the year. 

About $11 trillion invested abroad by Japanese investors may be impacted if the Bank of Japan ends its ultra loose monetary policy, causing sharp swings in international bond markets. 

 

U.S. Indexes & Yields 

The S&P 500 index decreased 0.1% to 4,100.60 and the Nasdaq Composite index declined 0.2% to 12,066.21. 

The yield on 2-year Treasury notes inched up to 4.01%, 10-year Treasury notes advanced to 3.41% and 30-year Treasury bonds decreased to 3.63%. 

Crude oil edged down 95 cents to $79.71 a barrel and natural gas futures jumped 14 cents to $2.15 a thermal unit. 

Gold price fell $19.15 to $1,988.82 an ounce and silver fell 19 cents to $24.81 an ounce. 

 

U.S. Stock Movers 

Semiconductor stocks were in focus after Samsung said it plans to halt memory chip production in the near term after the weakness in demand for electronic and computing devices. 

Taiwan Semiconductor Mfg Co Ltd declined 1.8% to $88.60 after the company reported a decline in March sales. 

Revenue in March declined 10.9% from the previous month and plunged 15% fr.4om a year ago to NT$145.4 billion. 

Sales in the March quarter increased 3.6% to NT$508.6 billion. 

Micron Technology jumped 4.7% to $61.35 but Qualcomm Inc declined 1.2% to $121.50.  

Tesla Inc dropped 4% to $177.53 after the company said plans to cut vehicle prices again in China and build another factory to produce electric vehicle batteries. 

Capital One Financial Corp decreased 1.7% to $93.28 after the financial services company said in a regulatory filing that Walmart Inc is suing the company to end its partnership agreement. 

Natural gas stocks were in focus after natural gas price soared nearly 10%. 

Excelerate Energy Inc increased 1.1% to $23.13 and EQT Corp gained 4.6% to $33.61 and Southwestern Energy Co added 4.4% to $5.24.