Fed seen hiking 25 bps, ECB and BOE by 50 bps
Megacap stocks lead earnings results this week
MSCI index on track for biggest January pct gain since
NEW YORK, Jan 30 (Reuters) - A gauge of global stocks
retreated on Monday after six sessions of gains while U.S.
Treasury yields rose ahead of central bank policy announcements
and data that may shed light on whether progress has been made
in bringing down inflation.
Investors widely expect the Federal Reserve will raise rates
by 25 basis points (bps) on Wednesday, with announcements on
Thursday from the Bank of England and European Central Bank
(ECB), both of which are largely expected to hike by 50 bps.
"The market has had a big run and the trading is a bit more
cautious heading into a week which likely will be an inflection
point for the overall market," said Keith Lerner, co-chief
investment officer at Truist Advisory Services in Atlanta,
On Wall Street, U.S. stocks slumped, with 10 of the 11 S&P
sectors closing lower, while Johnson & Johnson lost
3.70% after a U.S. court rejected the company's plan to offload
into bankruptcy tens of thousands of lawsuits over its talc
The Dow Jones Industrial Average fell 260.99 points,
or 0.77%, to 33,717.09, the S&P 500 lost 52.79 points, or
1.30%, to 4,017.77 and the Nasdaq Composite dropped
227.90 points, or 1.96%, to 11,393.81.
The rate increase expected at the Federal Open Market
Committee's Jan. 31-Feb. 1 meeting would bring the policy rate
to the 4.5%-4.75% range. That's two quarter-point rate hikes
short of the level most Fed policymakers in December thought
would be "sufficiently restrictive" to bring inflation under
control. But futures currently expect rates to peak at
about 4.9% in June before retreating to 4.5% by year-end.
Markets will also grapple with a host of U.S. economic data,
culminating in Friday's payrolls report for January. Investors
see signs of weakening in the labor market as a key factor in
bringing down high inflation. Other data included gauges of the
manufacturing and services sectors.
The U.S. corporate earnings season also rolls on, with
earnings this week expected from Apple, Alphabet
and Amazon. Earnings for S&P 500 companies
are expected to show a decline of 3% for the quarter, according
to Refinitiv data, weaker than the 1.6% fall seen at the start
of the year.
Stocks in Europe closed lower, with rate-sensitive names
such as technology shares among the primary decliners after
inflation data from Spain came in above expectations while other
data showed the German economy unexpectedly contracted in the
The pan-European STOXX 600 index lost 0.17% and
MSCI's gauge of stocks across the globe shed
0.99%. MSCI's index was on track for its biggest January
percentage gain since 2019 while the STOXX 600 was poised for
its largest January percentage gain since 2015.
U.S. Treasury yields rose ahead of the central bank meetings
and economic data, with the 10-year yield up for a third
consecutive session. Benchmark 10-year notes were up
2.6 basis points to 3.544%, from 3.518% late on Friday.
The greenback, which was poised for its fourth month of
declines as expectation have increased the Fed was nearing the
end of its rate-hiking cycle, was up for a third straight
session against a basket of major currencies.
The dollar index rose 0.334%, with the euro
down 0.17% to $1.0848.
The Japanese yen weakened 0.42% versus the greenback to
130.40 per dollar, while Sterling was last trading at
$1.2345, down 0.42% on the day.
Crude prices fell ahead of the expected hikes by central
banks and signals of strong Russian exports.
U.S. crude settled down 2.23% at $77.90 per barrel
and Brent settled at $84.90, down 2.03% on the day.
(Reporting by Chuck Mikolajczak, additional reporting by Lewis
Editing by Bernadette Baum and Deepa Babington)