(Bloomberg) — Stock futures fell and bond yields rose as data showing surprisingly high labor costs reinforced speculation the Federal Reserve will be in no rush to cut interest rates.
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Just a day ahead of the Fed decision, equities came under renewed pressure after the employment cost index increased 1.2%, the most in a year, and topped all estimates. The yield on 10-year Treasuries advanced five basis points to 4.66%. The dollar climbed.
“The Fed favors this metric over average hourly earnings data because it’s quarterly, considers a more comprehensive look at employee compensation instead of just wages, and accounts for the composition issues in the hourly earnings data that can distort wage pressures,” said Will Compernolle at FHN Financial. “An accelerating ECI will give the Fed one more reason to not start easing policy anytime soon.”
Sticky US inflation this year isn’t necessarily bad news for the stock rally as higher yields are a reflection of strong economic growth, according to HSBC strategists led by Max Kettner.
“If the Fed’s cuts turn out to be more like the recalibration in the mid-1990s and 2019, it may not necessarily be bad news for risk assets,” they wrote.
Corporate Highlights:
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McDonald’s Corp. results fell short of expectations in the first quarter, hampered by slowing growth in the US and the reverberations of the Israel-Hamas war.
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Coca-Cola Co. issued a more optimistic 2024 forecast after first-quarter results outpaced Wall Street’s expectations.
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3M Co. plans to slash its dividend, ending more than six decades of boosting the payout each year as it enters a new era following the spinoff of its health-care products division.
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Eli Lilly & Co. raised its annual outlook for sales and profit as the company races to satisfy soaring demand for its blockbuster weight-loss and diabetes drugs.
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PayPal Holdings Inc.’s payment volume climbed 14% in the first quarter on increased consumer spending globally.
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Meta Platforms Inc.’s social media platforms Facebook and Instagram are under investigation from the European Union amid concerns they’re failing to cull targeted disinformation peddled by Russia that aims to sow discord on the continent.
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Walmart Inc.’s deal to buy smart-TV maker Vizio Holding Corp. will undergo an in-depth antitrust review by the Federal Trade Commission, Vizio said Tuesday.
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Archer-Daniels-Midland Co.’s profit fell less than expected in the first quarter as an increase in the crop trader’s processed volumes helped partly offset lower pricing and margins.
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Paramount Global replaced Chief Executive Officer Bob Bakish, appointing a management committee as the board negotiates a possible change in control of the company.
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MicroStrategy Inc. posted a first-quarter loss after taking an impairment change against the value of its roughly $13 billion in Bitcoin holdings even though the cryptocurrency surged during the period.
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Mercedes-Benz Group AG’s earnings plummeted 34% in the first quarter, weighed down by model changes and sluggish demand for electric vehicles.
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Huawei Technologies Co.’s profit rose for the fourth consecutive quarter, a sign the Chinese tech company is taking market share from Apple Inc. and other smartphone rivals.
Key events this week:
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Holiday across much of Europe, Wednesday
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Treasury’s quarterly refunding announcement, Wednesday
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US ADP employment change, JOLTS job openings, ISM Manufacturing, Wednesday
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Federal Reserve rate decision, Wednesday
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Eurozone S&P Global Manufacturing PMI, Thursday
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US factory orders, initial jobless claims, trade, Thursday
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Apple earnings, Thursday
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Eurozone unemployment, Friday
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US unemployment, nonfarm payrolls, ISM Services, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
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S&P 500 futures fell 0.4% as of 9:02 a.m. New York time
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Nasdaq 100 futures fell 0.5%
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Futures on the Dow Jones Industrial Average fell 0.5%
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The Stoxx Europe 600 fell 0.4%
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The MSCI World index was little changed
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.2% to $1.0703
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The British pound fell 0.4% to $1.2519
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The Japanese yen fell 0.7% to 157.46 per dollar
Cryptocurrencies
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Bitcoin fell 2.9% to $61,135.85
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Ether fell 5.4% to $3,004.48
Bonds
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The yield on 10-year Treasuries advanced five basis points to 4.66%
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Germany’s 10-year yield advanced six basis points to 2.59%
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Britain’s 10-year yield advanced five basis points to 4.34%
Commodities
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West Texas Intermediate crude rose 0.1% to $82.74 a barrel
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Spot gold fell 1.2% to $2,306.52 an ounce
This story was produced with the assistance of Bloomberg Automation.
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