Stocks weaker as U.S. yields, dollar rise

By Chuck Mikolajczak

NEW YORK (Reuters) - A gauge of global stocks was slightly higher on Monday as investors digested another round of corporate earnings, while the dollar and U.S. Treasuries yields rose after economic data further cemented expectations of a rate hike from the Federal Reserve in May.

After the first wave of bank earnings last week from names such as JP Morgan and Wells Fargo (NYSE:WFC) were better than anticipated, investors will now see results from the likes of Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC) and a host of regional banks.

Other notable S&P 500 companies scheduled to report earnings this week include Johnson & Johnson (NYSE:JNJ), Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA).

On Wall Street, stocks staged a modest rally late in the session to close near their highs of the day, but held within a tight trading range. State Street (NYSE:STT) STT.N, however, plunged 9.18%, its biggest daily percentage decline since March 2020, after posting quarterly results.

"The market is always sort of stuck in neutral around the early part of earnings season because nobody quite knows what to expect – is a company going to positively surprise or negatively surprise, we just don’t know," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York, New York.

"The other thing out there of course is the Fed, now the expectation is for a 25 basis-point hike in May. We are obviously very close to the end of Fed rate hikes, that doesn’t mean rates are coming down, that is why you are seeing the short end of the curve back up here in terms of yield."

The Dow Jones Industrial Average rose 100.71 points, or 0.3%, to 33,987.18, the S&P 500 gained 13.68 points, or 0.33%, to 4,151.32 and the Nasdaq Composite added 34.26 points, or 0.28%, to 12,157.72.

In Europe, stocks ended just barely lower to snap a five-session streak of gains, with the pan-European STOXX 600 index down 0.01%. The winning streak was the longest for the index in three months.

MSCI's gauge of stocks across the globe gained 0.10%.

U.S. yields climbed and the dollar strengthened, buoyed in part by economic data that showed a rebound in New York factory activity, while confidence among U.S. single-family homebuilders improved for a fourth straight month in April. The data helped to fuel growing expectations the Fed will raise rates by 25 basis points at its May meeting.

Graphic: Empire state- https://www.reuters.com/graphics/USA-STOCKS/zdvxdawervx/empirestate.png

While many see the Federal Reserve as closer to ending its rate hike cycle than other global central banks, economic data has indicated the economy is not near a recession yet, giving the Fed leeway to continue with rate hikes.

Market expectations for a 25 basis-point hike at the May meeting have risen to more than 86%, up from the 78% on Friday, according to CME's FedWatch Tool.

The yield on 10-year Treasury notes US10YT=RR was up 8 basis points to 3.602%.

The two-year US2YT=RR U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 9.3 basis points at 4.196%.

The dollar index =USD rose 0.413%, with the euro EUR= down 0.66% at $1.0926.

The Japanese yen weakened 0.51% versus the greenback at 134.47 per dollar, while Sterling GBP= was last trading at $1.2376, down 0.30% on the day. The greenback hit a one-month high against the yen as the Bank of Japan is widely expected to keep a loose monetary policy.

Graphic: Dollar hits one-month high against yen - https://www.reuters.com/graphics/GLOBAL-FOREX/jnpwylzabpw/chart.png

A bevy of Fed officials are scheduled to speak this week, as investors have a heightened focus on their comments ahead of the blackout period that begins on April 22 ahead of the central bank's May 2-3 meeting.

The dollar strength and rate hike concerns weighed on crude prices, as U.S. crude CLc1 settled down 2.1% at $80.83 per barrel and Brent LCOc1 settled at $84.76, down 1.8% on the day.