US stocks drift lower before Fed; dollar recovers losses

Bloomberg

US equities drifted lower as investors digested earnings reports and shifted focus to the Federal Reserve’s imminent rate decision. The dollar recovered from earlier losses to surge for a third straight session, while Treasuries were little changed.
The S&P 500 Index declined in Wednesday trading, with healthcare and financial stocks among the laggards. Tech shares moved higher on the back of Apple Inc.’s strong results. US Treasury yields retreated after approaching 3 percent as the government announced the size of quarterly debt auctions.
Investors are parsing details of the Treasury Department’s just-announced refunding plan as they await the Fed rate decision. They’ll be watching closely for any potential impact on yield spreads, and in particular for any signals that policy makers may consider pushing for three additional interest-rate increases in 2018.
“What they want the market to think is they’ll allow inflation to actually run above their target for some stretches,” Jonathan Beinner, chief investment officer of global fixed income at Goldman Sachs Asset Management, said on Bloomberg TV. “As always, they try to be balanced. They’re going to want the market to believe that they are on this path of quarterly hikes.”
The pound flirted with its first increase in six days before turning lower, while the euro’s advance stalled out after manufacturing and economic growth ebbed. Miners, automakers and technology shares led the Stoxx Europe 600 Index towards its best gain this week, shrugging off declines in most Asian markets.
As US trade officials prepare to visit China for talks Thursday and Friday, the People’s Bank of China weakened its daily currency fixing by more than traders and analysts had expected. The move raises questions about whether it may devalue further to counter American import tariffs.
Elsewhere, emerging-market equities and currencies mostly dropped. The surging dollar cut into commodity gains, slowing gold’s advance.
West Texas oil fell after the EIA reported the biggest weekly US crude build since January. The Federal Open Market Committee ends meetings with a decision on rates.
Eurozone producer prices are scheduled for tomorrow. The European Commission will present its spring economic forecasts, including growth, inflation, debt and deficit projections. Payroll gains in the US probably picked up in April, with the unemployment rate forecast to drop to 4 percent, according to surveys of economists before the data reports are out.
Earnings season continues with Tesla Inc. and HSBC Holdings Plc. The S&P 500 Index fell 0.3 percent New York. The Stoxx Europe 600 Index advanced 0.6 percent. The UK’s FTSE 100 Index gained 0.4 percent, its fifth consecutive advance. Germany’s DAX Index surged 1.7 percent to the highest in almost three months. The MSCI Emerging Market Index fell 0.9 percent, the biggest drop in a week.
The Bloomberg Dollar Spot Index jumped 0.2 percent. The euro decreased 0.3 percent to $1.1959. The British pound fell less than 0.05 percent to $1.3607.
The yield on 10-year Treasuries declined less than one basis point to 2.96 percent. Germany’s 10-year yield climbed two basis points to 0.58 percent, the largest surge in more than a week.