US stocks, Treasury bonds and gold prices teetered on Monday as investors grappled with worries about a slowing global economy and looked ahead to a busy week of corporate earnings and central banker speeches.
The US blue-chip stock index, the S&P 500, ranged from gains to losses in thin trade before ending the day almost exactly where it closed after the previous session. The tech-heavy Nasdaq Composite closed 0.1 percent lower. Trading volumes for S&P 500 stocks were about 20 percent below the recent average, according to Bloomberg data.
Gold, which normally rises in times of uncertainty, rose as much as 1.2 percent to $1,998 an ounce, hitting its highest level in more than a month before falling to $1,977, up 0.1 percent is equivalent to.
A broad MSCI index of Asia-Pacific stock markets fell 1.1 percent, the second straight day of declines. Major European markets were closed for the Easter Monday holiday.
Treasuries also struggled for direction, with the US 10-year Treasury eventually gaining 0.03 percentage point to 2.86 percent. Yields move inversely with price.
The cautious start to the trading week followed the release of a flood of economic data from China. Gross domestic product rose 4.8 percent in the first three months of 2022 compared to the same period in 2021, beating market expectations.
However, economic data for March showed how Beijing’s zero-Covid policies, including the Shanghai lockdown, have eroded growth prospects for the world’s second-largest economy. Retail sales fell 3.5 percent in March from the same month in 2021, the first year-on-year decline since July 2020; the annual rate of increase in industrial production slowed; and indicators tracking China’s struggling real estate market continued to deteriorate.
“While March data show a significant slowdown in growth momentum, the drag on economic activity is likely to be greater in April than in March amid the escalation of the zero-Covid policy and increasing disruption in economic activity,” analysts at JPMorgan said.
JPMorgan reduced its forecast for China’s GDP growth in 2022 to 4.6 percent from 4.9 percent. Barclays also cut its estimate for growth in 2022 to 4.3% from 4.5%.
Recent concerns about China added to investors’ uneasiness over plans by global central banks to tighten monetary policy to rein in raging inflation. In fact, US natural gas prices rose 10 percent on Monday to $8.03 per million British thermal units – the highest level since 2008.
Investors will be keeping a close eye on speeches by Federal Reserve officials, including Chairman Jay Powell, this week, which could provide further clues as to how aggressively policymakers plan to hike interest rates this year.
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Jan Hatzius, chief economist at Goldman Sachs, said over the weekend that the Federal Reserve was facing a “hard road to a soft landing” as it tried to bring inflation down from 8.5 percent to its 2 percent target on borrowing costs greatly inflate and reduce total assets by $9 trillion.
Hatzius sees a 15 percent chance that the US will fall into recession next year and a 35 percent chance that it will in the next 24 months.
Investors also digested the latest company results. Bank of America on Monday reported better-than-expected earnings, driven by a recovery in lending and higher interest rates.
The US first-quarter earnings season got off to a decent start, with companies in the S&P 500 reporting earnings 7.5 percent ahead of estimates so far, according to FactSet.
However, fewer than a tenth of companies in the blue-chip index have updated the market, and investors will have a better picture of the overall outlook by the end of this week when another 67 companies, including Netflix, IBM and American Express, do the results have reported.