NEW YORK, Dec 27 (Reuters) – The S&P 500 and Nasdaq closed lower on Tuesday after the release of U.S. economic data at the start of a shortened holiday week as bond yields rose after China reported that it would remove its COVID-19 quarantine rule for inbound travellers.
US Treasury yields rose as investors tried to gauge the trajectory of Federal Reserve interest rate hikes and watched China ease restrictions. While the changes in China were seen as a potential economic boost, fund managers were cautious about reports of rising infection rates there.
Meanwhile, US economic publications showed the expected November merchandise trade deficit narrowed to $83.35 billion from $98.8 billion the previous month, while a separate report indicated continued difficulties for the housing market as house prices fell on the back of rising mortgage rates.
Oil futures, after hitting a three-week high earlier in the day, were mixed in settlement, with restarts at some US power plants shut down by winter storms quashing hopes of a recovery in demand after the latest easing restrictions imposed by China.
Rising Treasury yields have put pressure on growth stocks, including the rate-sensitive tech sector, according to Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.
“It’s a lack of anyone with the conviction to step in and buy right now,” O’Rourke said.
The strategist also cited the weight of a sharp setback for electric car maker Tesla Inc. (TSLA.O)which fell 11.4% on Tuesday for its lowest close since August 2020. Reuters reported that Tesla was planning a reduced production schedule in Shanghai in January, extending production cuts started this month.
Gene Goldman, chief investment officer at Cetera Investment Management, called Tuesday’s session “lackluster” as investors awaited the minutes of next week’s Fed meeting and economic data such as the Fed report. ‘use.
The Dow Jones Industrial Average (.DJI) rose 37.83 points, or 0.11%, to 33,241.76, the S&P 500 (.SPX) fell 15.56 points, or 0.40%, to 3,829.26 and the Nasdaq Composite (.IXIC) fell 144.64 points, or 1.38%, to 10,353.23.
Markets in some regions, including London, Dublin, Hong Kong and Australia, remained closed after the Christmas holidays.
The MSCI Global Stock Gauge (.MIWD00000PUS) has lost 0.15% and is down 19.8% since the start of the year.
While Cetera’s Goldman said China’s evolving COVID policies would be “good news for the global economy going forward,” he noted renewed caution among people in China due to the rising current COVID infections since China eased restrictions.
Benchmark 10-year bonds rose 10.7 basis points to 3.854%, from 3.747% on Friday evening. The 30-year bond last rose 12 basis points to 3.9417% from 3.822%. The 2-year note was last up 6.6 basis points to 4.3891% from 4.323%.
The dollar was roughly flat on Tuesday as investors digested the news from China.
The dollar index, which measures the greenback against a basket of major currencies, rose 0.086%, with the euro up 0.04% at $1.0639.
The Japanese yen weakened 0.49% against the greenback at 133.54 to the dollar, while the pound last traded at $1.2026, down 0.28% on the day.
“We’ve been in a very tight trading range, and I think with the dollar strengthening against the euro and the yen, we could see further dollar gains against the Chinese currency,” he said. Marc Chandler, Chief Market Strategist at Bannockburn Global Forex.
In energy futures, U.S. crude settled down 0.04% to $79.53 a barrel and Brent ended at $84.33, up 0.49% on the day. .
Gold prices hit their highest level in six months on Tuesday as traders were bullish on China’s top consumer’s decision to further ease COVID-19 restrictions.
Spot gold added 0.8% to $1,812.58 an ounce. US gold futures gained 1.12% to $1,816.00 an ounce.
Reporting by Sinéad Carew in New York, Nell Mackenzie in London Additional reporting by Xie Yu and Ankur Banerjee Editing by Simon Cameron-Moore and Matthew Lewis
Our standards: The Thomson Reuters Trust Principles.