U.S. Stocks Pare Advance; Treasuries Decline: Markets Wrap

(Bloomberg) -- U.S. stocks pared their gains as traders assessed whether companies can continue to weather the supply-side crisis amid inflation pressures. Treasuries dropped. 

Tesla Inc. fell after Elon Musk raised the idea of selling more of his shares in online sparring with U.S. Senator Bernie Sanders. Blank-check company Gores Guggenheim Inc. surged as the stock was touted among retail traders.

Read: Ex-Fed Officials Dudley, Lacker See Rates Rising to at Least 3%

“Central banks may be becoming less accommodative, but they will be anxious not to derail the recovery or financial markets,” according to Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management and head of asset allocation Christophe Donay. “Q3 results have offered further proof of corporate strength.”

Inflationary headwinds may become a bigger force against U.S. stocks next year, according to Morgan Stanley strategists who prefer peers in Europe and Japan. They forecast the S&P 500 will end 2022 at 4,400 -- some 6% below current levels. For bonds, they expect 10-year yields to rise to 2.10% by the end of next year on improving growth and higher real rates, up from 1.54% on Monday.

“One reason we like equities in Europe and Japan is that we think inflationary challenges there are much less daunting than elsewhere,” strategists led by Andrew Sheets wrote Sunday. They also cited “more reasonable valuations, limited central bank tightening and less risk from higher taxes” vis-a-vis the U.S.

Biden will meet virtually with Chinese President Xi Jinping on Monday. Tensions between the two countries have been building over issues including Taiwan and restrictions on sales of U.S. technology to China. 

What to watch this week:

• Fed Presidents Thomas Barkin, Esther George, Raphael Bostic, Patrick Harker speak at various events. Tuesday
• Reserve Bank of Australia Governor Philip Lowe delivers a speech. Tuesday
• RBA minutes of November meeting. Tuesday
• U.S. retail sales are poised to show an acceleration in October as consumer demand remains resilient. Tuesday
• Euro zone CPI. Wednesday
• Conference Board U.S. leading index, initial jobless claims. Thursday
• Fed’s Richard Clarida and Mary Daly speak at Asia Economic Policy Conference. Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.1% as of 10:10 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average rose 0.2%
• The Stoxx Europe 600 rose 0.1%
• The MSCI World index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1437
• The British pound rose 0.2% to $1.3435
• The Japanese yen was little changed at 114.00 per dollar

Bonds

• The yield on 10-year Treasuries advanced four basis points to 1.60%
• Germany’s 10-year yield advanced one basis point to -0.24%
• Britain’s 10-year yield advanced three basis points to 0.94%

Commodities

• West Texas Intermediate crude fell 1.3% to $79.70 a barrel
• Gold futures fell 0.2% to $1,864.20 an ounce

©2021 Bloomberg L.P.