Wall Street treads water ahead of US data; dollar pressured by yen, yuan

© Reuters. A man walks past an electronic board showing stock visualizations outside a brokerage, in Tokyo, Japan, March 17, 2023. REUTERS/Androniki Christodoulou

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks followed their overseas counterparts lower at the top of a holiday-shortened week on Monday as investors positioned themselves ahead of crucial inflation data.

The three major U.S. stock indexes started the day modestly lower, with megacap momentum stocks pulling the tech-laden Nasdaq down most, while the dollar dipped with the threat of potential yen intervention looming and China’s government- supported yuan rally weighing on the greenback.

Wall Street focused on Boeing (NYSE:BA) Co after the planemaker announced its CEO Dave Calhoun will step down by year-end amid a flurry of safety concerns.

“There’s a bit of digesting (last week’s Fed decision) and waiting for economic data and first-quarter earnings which are just a couple of weeks away,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York.

“Keep in mind, it’s been a great year so far,” Pursche added. “The more legitimate component is there’s a small concern about resilience of the economy and whether or not we will in fact end up with a recession later this year because the Fed is waiting too long to lower rates.”

After the U.S. Federal Reserve’s decision last Wednesday to leave its key policy rate unchanged, and its “dot plot” still reflecting expectations for three cuts to that rate this year, markets are looking ahead to Friday’s Personal Consumption Expenditures (PCE) report due from the Commerce Department.

Analysts expect the PCE data to show inflation gathered heat in February, with prices rising by 0.4% after January’s 0.3% gain. However, so-called “core” price inflation, which strips away volatile food and energy prices, is seen cooling to 0.3% from 0.4%.

Year-on-year, headline and core PCE price indexes are expected land at 2.5% and 2.8%, respectively, still hovering within one percentage point of the Fed’s average annual 2% target.

The Dow Jones Industrial Average fell 123.25 points, or 0.31%, to 39,352.65, the S&P 500 lost 8.37 points, or 0.16%, to 5,225.81 and the Nasdaq Composite dropped 18.92 points, or 0.12%, to 16,409.90.

European stocks traded narrowly around unchanged after Friday’s record highs as market participants digested dovish sentiment from major central banks.

The pan-European STOXX 600 index rose 0.13% and MSCI’s gauge of stocks across the globe shed 0.11%.

Emerging market stocks lost 0.22%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.06% lower, while Japan’s Nikkei lost 1.16%.

The dollar dipped against the yen as Japan’s top currency diplomat warned against speculators trying to weaken the currency, while China’s yuan gained on suspected selling of dollars by state-owned banks.

“China and Japan trying to shore up their currencies is a reflection of weakness in their economies, and they’re putting a band-aid on something that requires something more significant,” Pursche said.

The dollar index rose 0.14%, with the euro up 0.29% to $1.0836.

The Japanese yen strengthened 0.12% versus the greenback at 151.32 per dollar, while Sterling was last trading at $1.2649, up 0.38% on the day.

Bitcoin was last up 9.0% at $69,194 as the cryptocurrency broke above its 10-day moving average.

Treasury yields edged higher as the market awaits the auction of $176 billion of U.S. government debt this week.

Benchmark 10-year notes last fell 7/32 in price to yield 4.2454%, from 4.218% late on Friday.

The 30-year bond last fell 11/32 in price to yield 4.4135%, from 4.392% late on Friday.

Oil prices gained ground as geopolitical conflicts stoked supply concerns.

U.S. crude rose 1.77% to $82.06 per barrel and Brent was last at $85.99, up 1.37% on the day.

Gold firmed ahead of key U.S. economic data this week.

Spot gold added 0.5% to $2,175.74 an ounce.