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Business

U.S. stocks struggle for direction as opening gains fizzle despite strong durables data

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U.S. stocks struggled for direction Monday afternoon, trading near unchanged, as investors weighed stronger-than-expected data on durable-goods orders against expectations for a slowing economy that could limit the magnitude of Federal Reserve rate increases.

What’s happening
  • The Dow Jones Industrial Average
    DJIA,
    +0.09%
    was almost unchanged at 31,503.
  • The S&P 500
    SPX,
    +0.01%
    was down 4 points, or 0.1%, at 3,907.
  • The Nasdaq Composite
    COMP,
    -0.35%
    shed 71 points, or 0.6%, at 11,537.

Last week, the S&P 500 jumped 6% to snap a three-week losing run. The Dow Jones Industrial Average rose 5% and the tech-heavy Nasdaq Composite gained 7%.

What’s driving markets

Stocks struggled to hang on to gains after data showed U.S. durable-goods orders rose by 0.7% in May, versus forecasts for a 0.2% rise, and pending home sales rebounded last month, reversing a six-month decline. Investors were caught between recession and inflation fears.

“Stocks can’t win right now, either the economic data softens and the economy is much weaker than we thought or robust readings pave the way for the Fed to be more aggressive with their inflation fight,” said Edward Moya, senior market analyst at Oanda, in a note.

Stocks had bounced last week in a move analysts credited to expectations a slowing economy could see the Federal Reserve hike rates less aggressively than previously expected. Fed Chairman Jerome Powell warned lawmakers that achieving a so-called soft landing for the economy as the Fed tightens interest rates would be “very challenging.”

JPMorgan quantitative strategist Marko Kolanovic published a note saying the market could rise 7% this week, due to the need for portfolios to rebalance as the month, quarter and first-half closes. That effect already played out near the end of the first quarter, and near the end of May.

“The S&P 500 is nearly 8% up from its lows at the start of the month and rallied 3% on Friday,” according to analysts at ING, in a Monday note. “Helping the rally has no doubt been last week’s repricing of tightening cycles around the world where 25-50 basis points of expected tightening were removed from some money market curves in just a few days. Driving that pricing seemed to be the much broader discussion — including from Federal Reserve Chair Jerome Powell — over the risks of recession.”

Strategists at Credit Suisse say bond yields may have seen their peak, particularly for Treasury-inflation protected securities, which in turn means the dollar
DXY,
-0.34%
 is close to its summit. They say their lead indicators are consistent with 0% GDP growth, as evidenced by the collapse in housing affordability, the weakness of corporate confidence and the weakness in the employment gauge of the Institute for Supply Management manufacturing index.

Group of Seven economic powers are meeting in Germany where they expect to announce an agreement on a price cap on Russian oil.

Companies in focus
  • Frontier Airlines parent Frontier Group Holdings Inc.
    ULCC,
    -11.01%
    issued a letter to Spirit Airlines Inc.
    SAVE,
    -7.55%
    shareholders, urging them to support the air carriers’ agreed upon merger deal. In the letter, Frontier Chairman William Franke and Chief Executive Barry Biffle said the recently amended Frontier-Spirit deal offers Spirit shareholders value “well in excess” of JetBlue Airways Corp.’s
    JBLU,
    +1.86%
    “illusory proposal, which lacks any realistic likelihood of obtaining regulatory approval.” Frontier shares fell more than10%, while Spirit shares dropped 8% and JetBlue shares gained 1.3%.
Other assets
  • The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.186%
    rose 4 basis points to 3.166%. Yields and debt prices move opposite each other.
  • The ICE U.S. Dollar Index
    DXY,
    -0.34%
    edged down 0.4%.
  • Bitcoin
    BTCUSD,
    -3.09%
    fell 3.4% to trade near $20,675.
  • Oil futures traded higher in choppy trade, with the U.S. benchmark
    CL.1,
    +2.24%
    up 1.3% near $109.04 a barrel. Gold
    GC00,
    -0.21%
    was off 0.2% below $1,827 an ounce.
  • The Stoxx Europe 600
    SXXP,
    +0.52%
    finished 0.5% higher, while London’s FTSE 100
    UKX,
    +0.69%
    gained 0.7%.
  • The Shanghai Composite
    SHCOMP,
    +0.88%
    ended 0.9% higher, while the Hang Seng Index
    HSI,
    +2.35%
    jumped 2.4% and Japan’s Nikkei 225
    NIK,
    +1.43%
    rose 1.4%.

— Steve Goldstein contributed to this article.

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Business

Stocks Open Higher Ahead of Powell Testimony

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U.S. stocks advanced ahead of a second day of testimony from Federal Reserve Chairman

Jerome Powell

after he warned that rapidly rising interest rates threatened a recession. 

The S&P 500 added 0.4% in early trading Thursday. The technology-heavy Nasdaq Composite Index rose 0.4% while the blue-chip Dow Jones Industrial Average also edged up 0.4%. 

Investors have mostly shed riskier assets in recent days, prompted by growing concerns that efforts by the Federal Reserve to bring inflation under control will take a toll on the economy. Investors are growing less optimistic that the Fed can engineer a so-called soft landing, whereby interest rates rise to curb inflation without pushing the economy into a recession. 

Mr. Powell acknowledged those risks in testimony to lawmakers Wednesday, saying that a recession was possible and that a soft landing for the economy would be “very challenging.” Mr. Powell is set to continue that testimony Thursday in front of a second group of lawmakers. 

Federal Reserve Chairman Jerome Powell said that interest rates would continue to rise until the central bank sees clear proof that inflation is slowing, but conceded that elevated rates could lead to a recession. Photo: Elizabeth Frants/Reuters

The S&P 500 closed down 0.1% Wednesday following Mr. Powell’s remarks, while the Dow Jones Industrial Average lost 0.2%. 

“Markets are in a real state of flux right now,” said Stephen Innes, managing partner at SPI Asset Management. “I don’t think the market is moving into bullish territory by any means.”

Large technology companies were leading gains premarket, with

Nvidia,

Snap

and

Amazon

each up around 0.9%.

The Labor Department said 229,000 Americans applied for unemployment benefits last week. Jobless claims—one of the earliest indicators of weakness in the labor market—remain at historically low levels. A gauge of activity in the manufacturing and service sectors is due shortly after the opening bell. 

In bond markets, Treasury yields declined for a second day though remained close to their highest level in more than a decade. The yield on the benchmark 10-year U.S. Treasury note fell to 3.099% from 3.155% on Wednesday. Bond yields fall as prices rise.

The U.S. dollar firmed, with the WSJ Dollar Index, which measures the currency against a basket of its peers, rising 0.1%.

In Europe, the pan-continental Stoxx Europe 600 was flat. Business surveys released Thursday showed Europe’s economy slowed sharply in June as soaring consumer prices undercut demand for a range of goods and services. 

“Inflation is at the center of all this, but there is also fading growth, and interest rates are going up. All of that together is a horrible cocktail and you just need to step aside and wait for that to work itself out,” said Hani Redha, a portfolio manager at PineBridge Investments.

A trader at the New York Stock Exchange on Wednesday.



Photo:

BRENDAN MCDERMID/REUTERS

European gas prices jumped after Germany took a step closer to rationing gas by triggering the second step of an emergency plan to deal with curtailed Russian supplies. The region’s gas prices gained more than 5% to €134.25 a megawatt hour, their highest level since March. 

Bitcoin rose 3.9% from its 5 p.m. ET level on Wednesday to $20,668.90. The cryptocurrency has steadied in recent days after a sharp selloff earlier in the month.

In commodity markets, oil prices wavered after sharp losses Wednesday. Brent crude, the international oil benchmark, weakened 0.5% to $108.16 a barrel. Other commodities whose demand is closely correlated to the economy also slipped. Copper prices in London fell 2.6% to $8,555.50 a metric ton.

Soaring energy prices have been a key contributor to the multidecade high inflation currently roiling global economies. Concern that a recession would see demand for oil fade was prompting investors to sell the commodity, said Mr. Redha. 

“I have said for a while there will be no bottom in equities without also a sustainable top in oil prices and bond yields,” he said. “I think that is potentially under way.”

In Asia, stock markets mostly rose. In Hong Kong, the Hang Seng Index rose 1.3% while in mainland China the Shanghai Composite Index rose 1.6%. In Japan, the Nikkei 225 added 0.1%.

Write to Will Horner at william.horner@wsj.com

Navigating the Bear Market

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Business

U.S. Stocks Rise as Volatile Trading Persists

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U.S. stocks were higher Friday, putting major indexes on course to extend the whipsaw moves that have injected fresh volatility into markets this week.

The S&P 500 rose 0.7%. The Dow Jones Industrial Average added 0.3%, and the Nasdaq Composite climbed 1.4%. All three major indexes fell Thursday, closing at their lowest levels since 2020. Thursday’s decline reversed a rally in stocks Wednesday. 

Stock indexes are on track to finish the week with sharp losses as investors have tried to assess inflation, central banks’ response to it and the outlook for the global economy. The Federal Reserve earlier this week approved the largest interest-rate increase since 1994 and signaled it would continue lifting rates this year at the most rapid pace in decades to fight inflation.

Recent rate increases have reversed a prior cycle of loosening monetary policy that allowed prices for both stocks and bonds to rally in recent years. Prospects for repeated rate rises throughout the rest of the year have caused investors to sell out of both assets and lent to fears that rapid tightening could reduce growth. U.S. mortgage rates recently reached their highest level in more than 13 years. Recent economic data reports have shown sharp declines in key sectors.

“The central banks, who have been our friends for a very long time, are telling us we should expect pain,” said Hani Redha, a portfolio manager at PineBridge Investments. “That inflation number is the only thing that matters right now. Even if we see growth slowing a lot, that will not be enough to cause the Fed to change course.” 

Mr. Redha said it is possible that inflation could still climb further in the coming months as energy prices remain elevated. Brent crude, the international benchmark for oil prices, edged down 2.4% to $117.03 a barrel. 

European natural-gas prices edged down 0.6% Friday, putting them up almost 50% for the week. Moscow’s move to slash natural-gas exports to Europe this week has pitched the continent’s energy crisis into a dangerous new phase that threatens to drain vital fuel supplies and kneecap the continent’s economy.

Where in Americans’ household budgets is inflation hitting the hardest? WSJ’s Jon Hilsenrath traces the roots of the rising prices to learn why some sectors have risen so much more than others. Photo Illustration: Laura Kammermann/WSJ

Signs remained that investors sought assets viewed as safe to hold, such as the U.S. dollar and U.S. government bonds. The WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, rose 0.9%. In bond markets, the yield on benchmark 10-year Treasurys ticked down to 3.262% from 3.303% Thursday. Yields fall as prices rise. 

The dollar value of bitcoin and other cryptocurrencies showed tepid signs of stabilizing after tumbling sharply over the 10 days prior. Bitcoin was roughly unchanged from its 5 p.m. ET level Thursday to trade at $20,637 Friday. Cryptocurrencies have been hit by rising interest rates that are sapping appetite for riskier assets, and concerns about select projects and companies in the crypto ecosystem. 

Shares of

Adobe

fell 4.1% after the provider of software for creativity, marketing, and documents gave softer-than-expected guidance.

Overseas, the pan-continental Stoxx Europe 600 added 0.7%. Shares of commodity mining and trading giant

Glencore

added 0.8% in London trading after the company raised price and cost guidance for its coal operations and said that its trading business is outperforming expectations.

Stocks on Wall Street closed sharply lower on Thursday, with Dow Jones Industrial Average below 30000.



Photo:

BRENDAN MCDERMID/REUTERS

In Asia, the

Bank of Japan

maintained ultralow interest rates on Friday, confirming that it won’t join the Federal Reserve and other major global central banks in tightening monetary policy. Japan’s Nikkei 225 stock index fell 1.8% and the Japanese yen fell 1.8% against the dollar. 

South Korea’s Kospi edged down 0.4%, while China’s Shanghai Composite added 1%.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

Inflation and the Economy

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Business

Global Stocks Rise as China Signals Stimulus for Shanghai

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International stocks rose Monday, extending a rally that has pared some of this year’s losses, while U.S. markets were closed for the Memorial Day holiday.

The Stoxx Europe 600 added 0.6%, led by shares of technology and luxury-goods firms. Germany’s DAX gained 0.8% and London’s FTSE 100 edged up 0.2%.

Global markets were boosted by the looming relaxation of some Covid-19 curbs in China. Shanghai’s Vice Mayor Wu Qing said over the weekend that authorities will loosen the conditions under which companies are able to resume work this week, and the city’s government laid out a 50-point plan for accelerating the economic recovery. The measures include tax cuts for businesses and subsidies for purchases of electric vehicles, the official Xinhua News Agency said.

Futures for the S&P 500 gained 0.6% by noon ET. The U.S. stock market is due to reopen Tuesday, as is the Treasury market. Yields on government bonds retreated from their 2022 highs in the run-up to Friday’s close, helping lift stocks after a weekslong drubbing. The S&P 500 snapped a seven-week losing streak Friday and posted its biggest weekly gain since November.

Still, some money managers caution that the pickup in stocks and bond prices may be a short-lived blip in a longer-running retreat. They say most of the factors that have contributed to this year’s losses—the war in Ukraine, higher interest rates set by the Federal Reserve and a slowing economy—are still in place.

“We are about to see a bear-market rally—or are in the midst of it,” said Daniel Egger, chief investment officer at St. Gotthard Fund Management.

Mr. Egger said yields will begin to rise again and that forecasts for corporate earnings are too high, while profit margins are under pressure from high commodity prices. “This doesn’t bode well for stocks,” he said.

On the economic front, data showed inflation accelerating in major European economies. Germany’s annual inflation rate hit 8.7% this month, according to preliminary figures, the quickest pace since 1973. In Spain, consumer prices rose 8.5% on the year, up from the 8.3% rate recorded in April.

Shares of European luxury-goods companies that have tapped into Chinese demand benefited from the prospect of lighter-touch lockdowns.

Hermès International

gained 3.9% and

Compagnie Financière Richemont

rose 2.9%.

L’Oréal,

the French personal-care company, gained 2.1% and

LVMH Moët Hennessy Louis Vuitton

added 2.6%.

In commodity markets, benchmark Brent-crude futures rose 1.2% to $116.90 a barrel and touched their highest level in more than two months. Leaders of European Union members are due to meet Monday and Tuesday, after diplomats over the weekend failed to strike a deal on sanctions that would limit imports of Russian oil.

Global stock markets were broadly higher on Monday.



Photo:

peter parks/Agence France-Presse/Getty Images

In Asia, the Shanghai Composite Index added 0.6% and Hong Kong’s Hang Seng jumped 2.1%.

In China, companies that serve Chinese consumers registered some of the largest advances. Hot-pot restaurant chain

Haidilao International Holding Ltd.

, brewer

China Resources Beer

(Holdings) Co. and sportswear company

Li Ning Co. Ltd.

, surged between 8.2% and 11% in Hong Kong. 

Chinese internet stocks built on a rally from late last week, as the Hang Seng Tech Index rose 3.9%. The food-delivery giant

Meituan

jumped 6.8%. Chinese e-commerce platform

Pinduoduo Inc.

, whose stock trades in the U.S., on Friday reported better-than-expected quarterly profit and revenue, after similarly strong results from

Alibaba Group Holding Ltd.

and

Baidu Inc.

Investors are hopeful that China is past the worst of its Covid-19 wave in terms of lockdown severity and case numbers, said

Michael Metcalfe,

head of macro strategy at State Street Global Markets. That would lessen one of the forces pushing the world economy into a period of low growth and high inflation, he said.

Nonetheless, Mr. Metcalfe said, inflation remains elevated in both Europe and the U.S., maintaining the pressure on central banks to raise interest rates. “There’s nothing that we see in the current inflation trend that gives us any confidence,” he said.

Write to Joe Wallace at joe.wallace@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

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Business

Stocks End Higher, Lifted by Retailer Results

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U.S. stocks rose Thursday, with the Dow Jones Industrial Average notching a fifth consecutive day higher, after strong results from retailers lifted sentiment across the market.

The blue chips added 1.6%, while the S&P 500 advanced 2%. The tech-heavy Nasdaq Composite climbed 2.7%, helped by gains in shares of

Apple,

Microsoft,

Amazon.com

and

Tesla.

The outlook for stocks turned cheerier Thursday when several retailers delivered strong results.

Macy’s

reported robust sales growth and lifted its earnings guidance, while discount chains

Dollar General

DG 13.71%

and

Dollar Tree

DLTR 21.87%

beat Wall Street’s earnings expectations.

Last week, results from retailers including Walmart, Target and Kohl’s raised concerns that rising costs are eroding profits while inflation prompts some consumers to rethink their budgets.

“After having a real challenging time with retail last week, you’re starting to see some other signs that not everybody in retail is doing poorly,” said

Wayne Wicker,

chief investment officer at MissionSquare Retirement. “It probably provides a little more confidence that the consumer continues to be reasonably strong.” 

Equity investors have endured a particularly volatile period lately. At the end of last week the S&P 500 fell far enough that it was on track to close at least 20% below its January peak. The benchmark then reversed course to avoid closing in bear market territory.

Despite the advances by major indexes this week, many investors expect markets to remain unsettled for some time to come.

“I think we’re going to still go through some more volatility ahead,” said

Leslie Thompson,

chief investment officer at Spectrum Wealth Management.

Investors have been considering how the Federal Reserve’s plans to tighten monetary policy to combat inflation could weigh on economic growth and the performance of financial markets.

Fed meeting minutes released Wednesday showed that policy makers were in agreement for half-percentage point increases in June and July, in line with previous communication. Major stock indexes closed higher after the release. 

“To some extent, markets have been reassured that the Fed isn’t going to tighten more aggressively than what is expected,” said

Luc Filip,

head of investments at SYZ Private Banking.

Traders worked on the floor of the New York Stock Exchange on Tuesday.



Photo:

justin lane/Shutterstock

Money managers are closely watching fresh data as they gauge the health of the economy. On Thursday a second reading of first-quarter U.S. gross domestic product came in worse than the first with a contraction at an annual rate of 1.5%.

“Economic data has come in weaker than expected lately. We do see this tightening in the economy. How severe the growth slowdown is what markets are thinking about now,” said

Shaniel Ramjee,

a multiasset fund manager at Pictet Asset Management.

Initial jobless claims fell last week and hovered near historic lows, suggesting a mixed economic picture. 

Earnings reports continued to drive moves in individual stocks. Analysts have been scrutinizing results for indications that inflation has begun to weigh on profits.

“We are focusing on earnings and profitability. A lot of stable companies are reporting lower guidance,” Mr. Ramjee said. “Even the tech sector is not immune to margin pressure, especially from input costs like wages.” 

Nvidia

shares rose more than 5% after the chip maker posted record revenue, though its sales outlook for the current quarter came in below Wall Street’s estimates.

Shares of

Williams-Sonoma

jumped 13% after the retailer posted profits that beat analysts’ expectations. Macy’s shares climbed 19% after it raised full-year earnings guidance.

Dollar Tree shares advanced nearly 22% and Dollar General shares rose nearly 14% after the discount retail chains reported profits higher than expectations.

Shares of

VMware

added 3.4% after

Broadcom

confirmed that it will acquire the cloud computing firm for $61 billion in cash and stock. Broadcom shares rose 3%.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note rose to 2.756%, from 2.746% Wednesday. Yields rise as bond prices fall.

Global oil benchmark Brent crude added 3% to trade at $117.40 a barrel.

Overseas, the pan-continental Stoxx Europe 600 rose 0.8%. In Asia, major benchmarks were mixed. The Shanghai Composite Index added 0.5% while Hong Kong’s Hang Seng fell 0.3%. Japan’s Nikkei 225 also declined 0.3%. 

South Korea’s central bank raised a key policy rate to 1.75% on Thursday and signaled it would tighten policy further to keep fighting against high inflation. 

Write to Karen Langley at karen.langley@wsj.com and Anna Hirtenstein at anna.hirtenstein@wsj.com

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Business

Stocks Open Mixed Ahead of Fed Meeting

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U.S. stock indexes were mixed at the opening Tuesday as investors geared up for the Federal Reserve’s policy decision this week and evaluated a batch of earnings.

The S&P 500 rose 0.3% in early trading. The benchmark stocks gauge rose 0.6% Monday, its third gain in four trading days. The technology-focused Nasdaq Composite added 0.4% while the Dow Jones Industrial Average was about flat.

Those moves belied a tense mood among investors expecting the central bank to accelerate its tightening of monetary policy this week, the latest step in inflation-fighting efforts that have already raised borrowing costs throughout the economy this year, scrambling stock and bond markets.

Traders are reacting to a slew of big companies’ latest reports and financial forecasts. Pfizer fell 0.7% after forecasting lower revenue than predicted by analysts. Investment firm KKR rose about 2% after swinging to a loss.

Estee Lauder

lost 4.4% after the company lowered its revenue and earnings outlook.

Elliott Investment Management disclosed a roughly 6% stake in Western Digital, pushing shares of the data-storage company up 12%.

Rockwell Automation

said quarterly earnings tumbled, sending shares down 14%.

The yield on 10-year Treasury notes topped 3% for a second straight day before slipping back to 2.928%, compared with 2.995% Monday. Yields, which move inversely to bond prices and are a reference for borrowing costs throughout the economy, have shot to their highest levels since 2018 in anticipation of higher interest rates.

They have also dragged up government borrowing costs globally. The yield on 10-year German government bonds, the benchmark in Europe, surpassed 1% Tuesday for the first time since 2015, before slipping back to 0.935%.

Overseas stock markets wavered. The Stoxx Europe 600 gained about 0.3%, led by shares of banks and oil-and-gas companies on a busy day for earnings in the region.

BP shares rose 3.1% after the oil producer reported underlying profit of $6.2 billion, when stripping out a pretax accounting charge related to its decision to exit its Russia holdings.

BNP Paribas

posted a jump in earnings, sending shares of the French lender 4.3% higher.

Sweden’s OMX Stockholm All-Share steadied, edging up 0.1%. On Monday, the market was among the worst affected by a flash crash in European shares sparked by an erroneous sale by

Citigroup.

Mainland Chinese markets were closed for a public holiday. Hong Kong’s Hang Seng edged up 0.1%.

All eyes are on the Federal Reserve’s next steps.



Photo:

BRENDAN MCDERMID/REUTERS

All eyes are on the Fed’s next steps as the central bank tries to tap the brakes on the fastest pace of inflation in decades. Rising rates have combined with coronavirus shutdowns in China and the war in Ukraine to send jitters through stock markets this year.

Rate-setting officials will gather Tuesday for a two-day policy meeting. At its conclusion Wednesday, the Fed is expected to raise interest rates by a half percentage point, the first such increase in 22 years and following on from a quarter-point rise in March.

Investors will also seek details from Chairman

Jerome Powell

on the central bank’s plans to reduce its bondholdings. Officials have recently indicated that they will allow $95 billion in securities to mature every month, unwinding another form of stimulus lavished on markets during the pandemic.

“It appears that the war in Ukraine hasn’t derailed the Fed in the slightest,” said

Gregory Perdon,

co-chief investment officer at

Arbuthnot Latham.

Financial conditions have already tightened significantly, Mr. Perdon added, pointing to a strengthening dollar, the increase in Treasury yields and rising mortgage rates.

Earnings season continues apace.

Airbnb,

ABNB -4.98%

Starbucks,

Lyft

and

American International Group

are on the block after markets close.

Broadly positive corporate reports have failed to steady the market in recent weeks. Earnings growth is in line with historical norms at about 11% annually, according to Deutsche Bank analysts, while margins have remained near record levels despite rising input prices.

In commodities, Brent-crude futures prices slipped 1% to $106.55 a barrel. Traders are awaiting a meeting of ministers from OPEC members and their allies including Russia on Thursday, and monitoring shutdowns in China that are curbing fuel demand.

A European Union proposal to ban Russian crude oil by the end of the year is due to be circulated to member states Tuesday.

Federal Reserve Chairman Jerome Powell has indicated that the central bank is likely to raise interest rates by a half percentage point at its meeting. Photo: Samuel Corum/Getty Images

Write to Joe Wallace at joe.wallace@wsj.com and Matt Grossman at matt.grossman@wsj.com.

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Business

Stocks Turn Higher After Tech-Led Selloff

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U.S. stocks rose Wednesday in choppy trading, clawing back some of their losses after selling off sharply a day earlier.

The S&P 500 gained 1.4% in afternoon trading, while the Dow Jones Industrial Average added 1.2%, or about 407 points. The technology-focused Nasdaq Composite advanced 1.4%. The gains were broad-based, with 10 of the S&P 500’s 11 sectors rising. Only the communications services group lost ground.

On Tuesday, the Nasdaq recorded its largest one-day percentage decline since September 2020, while the Dow dropped more than 800 points, as investors digested earnings reports and weighed concerns about inflation, the prospect of rapid policy tightening by the Federal Reserve and the spread of Covid-19 in China.

Major U.S. stock indexes are down substantially for the year, with the S&P 500 down 11% and the Nasdaq Composite down 19%. On Tuesday, the Nasdaq closed at its lowest level since December 2020, wiping out the gains it notched in 2021. The Russell 2000 index of small-cap companies closed Tuesday at its lowest level since December 2020. 

Investors said they looked at Wednesday’s moves higher as a temporary relief rally.

“Stocks have been so weak so far this month I believe investors are seeing some value in the current pricing,” said

Tracie McMillion,

head of global asset allocation strategy at Wells Fargo Investment Institute.

Seema Shah,

chief strategist at Principal Global Investors, said she sees the next moves in the stock market as either sideways or down. 

Earnings are “supporting the market to some extent, but I don’t think it’s enough to support it higher,” Ms. Shah said. She said her team has moved to a neutral recommendation on their overall equity positions. 

“The risks are just piling up,” she said. “We don’t want to be picking up pennies in front of the steamroller.”

Many big companies are reporting earnings this week, with results due after Wednesday’s closing bell from companies including Facebook parent

Meta Platforms

and

Ford.

Twitter,

which this week agreed to sell itself for $44 billion to Elon Musk, is set to report Thursday.

Nearly 80% of S&P 500 companies that have reported earnings so far have surpassed analysts’ estimates,

FactSet

data show. Still,

Emily Roland,

co-chief investment strategist at John Hancock Investment Management, said investors remain focused on a number of wide-ranging issues weighing on markets.

“Markets are mostly focused on some of the macro concerns around aggressive tighter Fed policy, as well as this global growth scare that’s playing out,” she said.

Many of those concerns have driven the dollar to its highest level in more than two years. The dollar tends to strengthen when the global economy sours and when investors expect U.S. growth to outpace the rest of the world. Rising interest rates in the U.S. also typically benefit the greenback as higher rates attract yield-seeking investors to the currency. 

The ICE U.S. Dollar Index, which tracks the currency against a basket of others, rose 0.9% to 103.23, on pace to finish at its highest level since January 2017 and surpass even the coronavirus-induced market downturn of March 2020. Including Wednesday, the index has risen for all but two of April’s 18 trading sessions. 

In the bond market, the yield on the 10-year U.S. Treasury note rose to 2.786% on Wednesday from 2.773% on Tuesday. Recently, investors have sold bonds in anticipation of higher interest rates, and the yield on the benchmark note remains close to its highest level since 2018. Bond yields and prices move inversely.

Natural-gas prices in Europe rose 3.8%, after earlier leaping more than 20% on Wednesday. The moves came after Russia said it would halt gas flows to Poland and Bulgaria over their refusal to pay on Moscow’s new terms. Brent crude, the international benchmark for oil prices, fell 0.3% to $104.26 a barrel. 

Among individual stocks,

Tesla

shares added 2.9%, on pace to recoup some of their losses after tumbling 12% Tuesday, its biggest one-day drop in more than a year. Twitter shares fell 3% to $48.26, about 11% below the $54.20 per-share-price that

Elon Musk

and Twitter agreed to in their deal to take the company private.

Boeing

shares were recently down 8.9%. The company posted a $1.24 billion quarterly loss and again pushed back the expected first delivery of its new 777X twin-aisle jet.

Microsoft

shares jumped 6.4% after the company on Tuesday reported higher revenue and profit last quarter as demand for its cloud services and software continued to climb. 

On Tuesday, the Nasdaq Composite recorded its largest one-day percentage decline since September 2020, while the Dow dropped more than 800 points.



Photo:

Michael Nagle/Zuma Press

Chipotle Mexican Grill

shares added 1.9% after the burrito chain said total revenue increased 16% last quarter amid higher food, beverage and packaging costs—which the company said was partially offset by menu-price increases. 

Lucid Group

shares gained 3% after the company late Tuesday said the government of Saudi Arabia had agreed to purchase up to 100,000 vehicles over a 10-year period. 

Shares of Google parent

Alphabet

fell 3.7% after the technology behemoth posted slower sales growth amid disruptions in digital advertising spending.

Robinhood Markets

shares fell 5.1% after the online brokerage said it was laying off 9% of its full-time employees. The company is set to report earnings Thursday.

European stocks rose, with the Stoxx Europe 600 closing up 0.7%. Major markets in Asia were mixed, with benchmarks in Japan and South Korea falling more than 1% and Chinese indexes gaining.

The CSI 300 index of the largest stocks listed in Shanghai and Shenzhen rose 2.9%, recouping some of its recent losses. In Hong Kong, the Hang Seng Index was up 0.1%.

The rebound came after China on Tuesday reported its lowest tally of Covid-19 cases in three weeks, and President

Xi Jinping

highlighted the importance of infrastructure for economic growth, singling out transport, energy and water conservation. Machinery and building-materials stocks jumped.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com, Dave Sebastian at dave.sebastian@wsj.com and Karen Langley at karen.langley@wsj.com

How the Biggest Companies Are Performing

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Business

‘A recession in the next 12 months is not in our base case’: Stocks got clobbered Friday. Why smart investors focus on the long game

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The stock market ended a volatile week on a gloomy note Friday, with the three major U.S. indexes plunging as investors got tripped up in worries like inflation, the Fed’s fight against it and fears of a hard-landing recession.

As confidence got pummeled as well, financial experts recommended that investors not panic, but think about long-term strategies instead.

The Dow Jones Industrial Average
DJIA,
-2.82%
finished down 981 points, or 2.8%, to 33,811.40. Friday’s performance was the index’s worst daily percentage decrease since Oct. 28, 2020, according to Dow Jones Market data.

Meanwhile, the Nasdaq Composite index
COMP,
-2.55%
shrank 2.6% and the S&P 500
SPX,
-2.77%
lost 2.8%.

TGIF, indeed.

See also: ‘Waiting for the perfect moment may not be the best strategy’: 3 things investors should do right now as stocks tumble (again)

Of course, some rattled retail investors could have already said that’s where things have been heading.

Almost 44% of people say the market is moving in a bearish direction, according to the latest weekly sentiment gauge from the American Association of Individual Investors. That’s almost 14 percentage points above the 30.5% historical average on bearish sentiment in the ongoing tracker.

On the other hand, nearly 19% said they were bullish in the week ending April 20. That’s up from a 15.8% read one week earlier. But it’s been May 2016 since bullish feeling in the ongoing tracker hasn’t surpassed 20% for two straight weeks.

Meanwhile, six in 10 investors anticipate an increase in market volatility and seven in 10 say they worry about a recession, according to a poll Nationwide released earlier this week.

In the same poll, roughly four in 10 investors (44%) said they felt more confident in their ability to protect their finances in any upcoming downturn and 38% said they felt confident in their ability to invest in the stock market.

It’s not as if retail investors have some monopoly on the side-eyed view of the market. Investors took $17.5 billion out of global equities during the past week, according to Bank of America. That outflow is the biggest weekly move for the exits this year, they noted.

The difference is, regular investors who are newer to the markets — and maybe started during the pandemic — might not have the same resources or risk tolerance to keep their stomach during shaky moments versus more sophisticated investors, or institutional investors.

Here’s where it’s important to take a breath and avoid doing anything drastic, experts say — especially with the recession talk continuing.

First off, there’s the short-term story.

“While sustained inflation and a more aggressive Fed is a risk to the economy and financial markets, a recession in the next 12 months is not in our base case,” wrote Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management.

The economy can grow even with the series of rate hikes investors are bracing for, and first-quarter earnings results have been “generally good,” Marcelli said in a note.

There is generally an exception, like Netflix
NFLX,
-1.24%
this week reporting a 200,000 net loss of subscribers when analysts were hoping for a 2.5 million subscription addition.

Besides, there’s the long-term story to remember. Think big and think about the long game on investing during downturns and bouts of volatility, said Scott Bishop, executive director of wealth solutions at Avidian Wealth Solutions, based in Houston, Texas.

The downbeat retail investor mood expressed in the surveys and sentiment trackers match what he’s hearing from his clients right now.

Still, Bishop says if people feel it’s time to adjust strategies or cut loses, “It’s time to make tweaks to your portfolio. You should not make wholesale changes.” For example, that means it could be a time to reconsider allocations, take loses for tax loss harvesting. “If you invest your portfolio based on headlines, you will always lose,” he said.

The pandemic feels like it’s stretched much longer, but it’s only been around two years since the COVID-19 market bottom. Then there’s the second part of story for people who stuck the market instead of cashing out.

At a time like this, it’s definitely worth remembering the next chapter in that story, Bishop said. Ultimately, the people who experience the most financial pain are those that “take extreme action , binary action, I’m in or I’m out.”

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Business

S&P 500, Nasdaq Fall While Bonds Extend Selloff

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Uncertainty about Federal Reserve policy and the war in Ukraine pushed the S&P 500 to a weekly loss and stoked a selloff in the government bond market.

The broad stock-market gauge lost 11.93 points, or 0.3%, to 4488.28 Friday. The tech-heavy Nasdaq Composite declined 186.30 points, or 1.3%, to 13711.00. The blue-chip Dow Jones Industrial Average reversed early losses to close up 137.55 points, or 0.4%, to 34721.12.

All three major indexes ended the week with losses. The S&P 500 snapped a three-week winning streak that had sent it toward its best performance since November 2020, losing 1.3%. The Dow and Nasdaq lost 0.3% and 3.9%, respectively.

Meanwhile, the yield on the benchmark 10-year Treasury note jumped to the highest level since March 2019 as bond prices tumbled.

Throughout the week, investors remained preoccupied with commentary from Federal Reserve officials as well as the minutes from the central bank’s March policy meeting, Those minutes showed that policy makers had considered raising interest rates and unwinding its balance sheet faster, driving stocks lower.

U.S. government bond yields influence the cost of borrowing, from mortgages to student loans. WSJ explains how they work and why they are so crucial to the economy. Photo illustration: Tom Grillo/WSJ

Federal Reserve Bank of St. Louis President

James Bullard

said Thursday that the central bank is behind on its mission to tame inflation and will likely have to act fairly forcefully to get price pressures under control. 

The swings in assets across the market highlight how murky the path of the economy remains for many investors, who are trying to pick the winners and losers of the rising interest-rate regime and grappling with surging commodity prices world-wide.

“The Fed has been the number-one story and that continues,” said

James Athey,

an investment manager at

Abrdn.

“The effect of the sort of tightening that has been discussed, that has a history of being very destabilizing.”  

A rapid jump in bond yields has led some investors and analysts to wonder whether the rise in yields will chip away at stock returns, and at what point investors will opt to ditch stocks in favor of bonds. Some investors have grown worried that the central bank’s interest rate hikes will drive a recession just two years after the U.S. exited the last downturn.

The yield on the benchmark 10-year Treasury note rose for a sixth consecutive day to 2.713%. Shorter-dated bond yields also advanced, with the two-year yield rising to 2.518% and notching a fifth consecutive week of gains. The two-year yield recorded its biggest five-week gain since May 1987.

“Although yield levels are still fairly low, if they rise fast enough, can equities withstand such a monetary shock?” wrote

Jim Paulsen,

chief investment strategist at the Leuthold Group, in a note to clients on Thursday.

Mr. Paulsen said that in the last three months, yields have risen faster than nearly 97% of all three-month periods since 1950. Still, he said, stocks have typically done well when the 10-year Treasury yield has been below 3% and until it rises to around 4%.

Some tech heavyweights that had rebounded lately pulled back in recent sessions.

Amazon.com

shares lost 5.6% this week, while Google-parent

Alphabet

shed 4.9%. The tech-heavy Nasdaq badly underperformed its peers, continuing a trend from earlier in the year.

Investors have also had to analyze mixed signals stemming from different parts of the market. The bond market, for example, was recently flashing a signal that a recession may be on the horizon. And transportation stocks, which are often viewed as an indicator of the health of the economy, have been tumbling.

The Dow Jones Transportation Average, which tracks 20 large U.S. companies ranging from delivery giant

United Parcel Service

to railroad operator

Union Pacific,

has fallen 11% to start the month, while the Dow industrials broadly are up about 0.1%. Companies that operate things like trains and planes tend to see higher demand when consumers are ramping up spending on travel and other goods and the economic outlook is brighter. 

Traders worked on the floor of the New York Stock Exchange on Thursday.



Photo:

David L. Nemec/Associated Press

The war in Ukraine has also continued to weigh on markets. Allegations of war crimes by Russian troops against civilians prompted a new round of sanctions from the U.S. and the European Union this week. The United Nations General Assembly on Thursday voted to suspend Russia from its Human Rights Council.  

Despite the recent volatility and signals from the bond market, major indexes have rapidly ascended from their lows in March. The S&P 500 has gained 7.6% since its March low in a broad-based rally. Some investors have said that stocks remain attractive even though Treasury yields have jumped.

“If you want to grow your buying power over the next 10 years, I can’t think of a better place to do it than equities,” said

Dev Kantesaria,

founder of Valley Forge Capital. “We have been buying more of the companies that are in our portfolio. We are close to 0% cash.”

In commodities, prices for palladium and platinum jumped after the body that oversees London’s market for the metals said it would bar metal produced by two major refining companies owned by the Russian government. Meanwhile, the United Nations on Friday said global food prices hit a record high in March.

Oil prices edged lower, with global benchmark Brent crude dropping for the second consecutive week to trade at $102.78 after losing 1.5%. Traders are assessing the impact of sanctions and self-sanctioning measures by energy companies on Russian oil exports and the release of strategic reserves by member nations of the International Energy Agency. 

Overseas, the pan-continental Stoxx Europe 600 closed Friday up 1.3%, finishing the week ahead 0.6%. The FTSE 100 ended the week up 1.7%, while Germany’s DAX index fell 1.1%.

In Asia, most major benchmarks closed up. The Shanghai Composite Index added 0.5% while Hong Kong’s Hang Seng Index rose 0.3%. Japan’s Nikkei 225 ticked up 0.4%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Gunjan Banerji at gunjan.banerji@wsj.com

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Business

Stocks Edge Higher After Wednesday’s Selloff

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U.S. stocks inched higher, putting Wall Street indexes on course to recoup some of Wednesday’s losses, while oil prices hovered near recent highs.

The S&P 500 rose 0.3% in early trading Thursday, a day after slumping 1.2%. The tech-focused Nasdaq Composite Index rose 0.2% and the Dow Jones Industrial Average gained 0.2%.

Stocks have struggled this year amid rising inflation, mixed economic signals, the war in Ukraine, and the continuing disruptions from the pandemic. The S&P 500 is down about 6% year-to-date, and the Nasdaq, down about 11%, is in its longest bear market since 2008.

That slump, however, comes on the back of a long rally. Wednesday marked the two-year anniversary of U.S. stocks’ pandemic lows. Since then, the S&P 500 and Nasdaq have doubled, while the Dow is up nearly 90%.

Investors have grappled with how Russia’s war with Ukraine will put additional pressure on supply chains that are already disrupted from Covid-19. Oil prices, which remain above $100 a barrel, have added to concerns that consumers could see higher prices for energy and even products like plastic wrap or lawn fertilizer. Federal Reserve officials have penciled in a series of additional interest-rate increases to limit inflation this year.

U.S. crude fell 1.2% to $113.58 a barrel.

“Through mid-February, it was all about rising rates, and then it was all about the war, and what’s concerning now is that they’ve combined,” said

Daniel Morris,

chief market strategist at BNP Paribas Asset Management. “The challenge in this environment is what do you buy. You can’t sit in cash. It is a ‘least-bad option’-type of market.”

WSJ’s Dion Rabouin explains why Wall Street is now betting big on crypto and what that means for the new asset class and its future. Photo composite: Elizabeth Smelov

Among individual stocks, shares of

Nikola

rose 12% after the company confirmed that production has begun on its electric commercial truck, the Tre.

Uber

was up 3.3% after saying it would list all New York City taxis on its app.

Russia’s stock market jumped in its first limited trading session since the West unveiled punishing sanctions nearly a month ago. The benchmark MOEX index added about 4%. 

The increase is unlikely to be interpreted as a sign that all is well with the Russian economy. Only 33 shares out of 50 shares on the index were allowed to trade. To prevent a steep selloff, Russia’s central bank banned short selling, and blocked foreigners, who make up a huge chunk of the market, from selling their shares. 

The move will also help prevent the ruble from weakening, as foreign investors would likely sell their ruble-denominated shares and then move out of the ruble for the dollar or euro. Russia’s currency has trimmed some of its losses against the dollar in recent sessions, trading at 98 rubles to the dollar Thursday. 

In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 2.367% from 2.320% Wednesday. Yields and prices move inversely.

Traders worked on the floor of the New York Stock Exchange on Tuesday.



Photo:

BRENDAN MCDERMID/REUTERS

Overseas, the pan-continental Stoxx Europe 600 was down 0.2%. Major indexes in Asia closed with mixed performance. China’s Shanghai Composite fell 0.6%, and Hong Kong’s Hang Seng declined 0.9%. Japan’s Nikkei 225 added almost 0.3%.

New orders for durable goods—products designed to last at least three years—fell 2.2% in February from the month prior after auto production was again held back by supply chain bottlenecks and

Boeing Co.

had a relatively weak month for aircraft orders. 

The number of Americans applying for first-time unemployment benefits fell to 187,000 in the week ended March 19, down from 215,000 in the week prior. 

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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