Markets: News  

By Vivien Lou Chen and William Watts

Major U.S. stock indexes posted their biggest declines in more than a week on Monday as investors weighed stronger-than-expected data on durable goods against expectations for a slowing economy that could limit the magnitude of Federal Reserve rate increases.

What happened

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 drove markets

Stocks struggled to hang on to opening gains even 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.

"We're going to be dealing with this push-and-pull for some time to come now," Dan Eye, chief investment officer at Fort Pitt Capital Group, said via phone. "I don't think we can expect to see a situation where inflation comes down significantly without a pretty significant slowdown in economic growth." Strategists at Credit Suisse said bond yields may have seen their peak, particularly for Treasury-inflation protected securities, which in turn could mean the dollarDXY 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.

Stocks had bounced last week in a move analysts credited to expectations that 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."

"Global growth and inflation concerns are keeping investors up at night," said BlackRock Investment Institute's Jean Boivin and others, in a Monday note. At a June 14-15 semiannual meeting for BlackRock's portfolio managers and executives, "concerns over a global growth slowdown weighed on participants as a stampede of central banks raised rates in an effort to rein in inflation." "Most attendees said they expect to see short cycles, more macro volatility and volatile markets," Boivin and others wrote.

Group of Seven economic powers met in Germany where they underscored their commitment to Ukraine for the long haul with plans to pursue a price cap on Russian oil.

Companies in focus

Other assets

-- Steve Goldstein contributed to this article.

-Vivien Lou Chen

(END) Dow Jones Newswires

June 27, 2022 16:45 ET (20:45 GMT)

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