By Stephen Culp
NEW YORK (Reuters) -U.S. stocks struggled for direction on Wednesday as crude prices tumbled and investors weighed cautious U.S. Federal Reserve commentary and ongoing geopolitical strife against mixed quarterly earnings.
Benchmark U.S. Treasury yields and the dollar eased back from multi-month highs, while gold backed down from its all-time high.
All three major U.S. stock indexes lost early momentum with the S&P 500 joining the Nasdaq in the red, while the blue-chip Dow held in positive territory.
“We’ve seen various assets with big moves higher recently, from yields to the dollar to even gold, suggesting more volatility could be one of the key words as we head into the summer months,” said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. “Volatility in the bond market usually precedes potential volatility in the stock market.”
U.S. Federal Reserve Chair Jerome Powell declined to provide guidance on Tuesday regarding the timing and extent of expected interest rate cuts, but said policy needs to be restrictive for longer, dimming hopes for rate cuts this year.
“The realization that Powell is pushing back on when the interest rate cuts might start has added to the overall confusion, solidifying the assumption that ‘higher for longer’ is likely the play,” Detrick added.
But Jay Hatfield, CEO and portfolio manager at InfraCap in New York, believes investors are now “overly pessimistic” with respect to central bank policy easing, saying that “by June (the Fed) will be ready for a cut.”
“Until then, we expect range-bound trading as we’re seeing today where there’s a push-pull between interest rates versus a strong economy and strong earnings,” Hatfield added.
The first-quarter reporting season gathered steam, with Travelers Companies missing profit estimates and U.S. Bancorp providing a disappointing interest income forecast.
Tensions in the Middle East remained high as delicate Gaza ceasefire talks continued and the international community awaited Israel’s threatened retaliation against Iran for its weekend missile attack.
The Dow Jones Industrial Average rose 106.39 points, or 0.28%, to 37,905.36, the S&P 500 lost 4.05 points, or 0.08%, to 5,047.36 and the Nasdaq Composite dropped 74.96 points, or 0.47%, to 15,790.30.
European shares followed a bruising sell-off with a slight gain, supported by solid earnings from consumer companies, while investors kept a wary eye on developments in the Middle East.
The pan-European STOXX 600 index rose 0.06% and MSCI’s gauge of stocks across the globe gained 0.02%.
Emerging market stocks rose 0.40%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.41% higher, while Japan’s Nikkei lost 1.32%.
U.S. Treasury yields dipped, slowing a sell-off over the last week that pushed benchmark yields to their highest level since November as the Fed reassessed the need for interest rate cuts.
Benchmark 10-year notes last rose 18/32 in price to yield 4.5853%, from 4.657% late on Tuesday.
The 30-year bond last rose 28/32 in price to yield 4.7002%, from 4.757% late on Tuesday.
The dollar eased back from 5-1/2 month highs against a basket of world currencies as investors processed the notion the Fed’s expected rate cutting cycle is on hold.
The dollar index fell 0.31%, with the euro up 0.55% to $1.0675.
The Japanese yen strengthened 0.25% versus the U.S. dollar at 154.34, while Sterling was last trading at $1.2461, up 0.30% on the day.
Oil prices tumbled as high U.S. commercial inventories and expectations of a possible fall in demand as a result of weaker economic data from China offset concerns that ongoing geopolitical turmoil could disrupt supplies.
U.S. crude slid by 3.13% to settle at $82.69 per barrel, while Brent settled at $87.29 per barrel, down 3.03% on the day.
Gold reversed its earlier gain as waning rate cut expectations took some shine out of the safe-haven metal.
Spot gold dropped 0.3% to $2,375.84 an ounce.
(Reporting by Stephen Culp in New YorkAdditional reporting by Tom Wilson in LondonEditing by Barbara Lewis and Matthew Lewis)
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