NEW YORK/LONDON, Jan 25 — US stock indexes closed mixed and the dollar slid a bit yesterday after companies warned of a tough year ahead along with some profit beats, while data showed US business activity contracted for a troubling seventh straight month in January.
S&P Global’s Flash US Composite Output Index last month rose to 46.6, below a reading of 50 where growth begins. Companies reported soft demand amid still high inflation that remains a headwind to customer spending, the report showed.
Real GDP growth is likely to turn negative in the first half of 2023, said Bill Adams, chief economist for Comerica Bank in Dallas, in a note.
“The economy still might dodge a recession,” he wrote. “But the many financial and economic indicators economists use to forecast business-cycle turning points suggest that a recession is more likely near term.”
The S&P 500 and Nasdaq closed slightly lower after bellwethers including 3M, Johnson & Johnson, Verizon and GE reported mixed results. The Dow rose as Traveller Cos, American Express and JPMorgan Chase JMP.N provided almost half its gains.
After the market closed, Microsoft Corp MSFT.O posted better-than-expected quarterly profit as a revenue jump at its cloud services unit helped offset a slump in the personal computer market, sending its shares 4 per cent higher in after-hours trade.
“What really is going to define whether the Nasdaq is going to continue to do well this year is how the earnings outlook looks, with Microsoft starting today,” said King Lip, chief investment strategist at BakerAvenue Wealth Management in San Francisco.
Up to Monday the Nasdaq had gained almost 10 per cent this year due to declining interest rates and a rebound after significant declines last year, Lip said.
The Dow Jones Industrial Average rose 0.31 per cent, the S&P 500 .SPX lost 0.07 per cent and the Nasdaq Composite .IXIC dropped 0.27 per cent.
Earlier in Europe, S&P Global data for the euro zone reinforced expectations the European Central Bank (ECB) will raise rates by a further 50 basis points on February 2, a day after the Fed is expected to have raised rates by 25 basis points.
Euro zone business activity made a surprise return to growth in January, according to the S&P Global survey — the latest sign that the downturn in the bloc may not be as deep as feared.
The pan-European STOXX 600 index closed down 0.24 per cent.
Overnight, Japan’s Nikkei closed at a more than one-month high, recovering all its losses since the Bank of Japan’s surprise policy tweak last month. Many Asian markets remained closed for the Lunar New Year.
MSCI’s all-country world index gained 0.04 per cent to eke out a fresh five-month closing high.
The euro was flat at US$1.0885, holding near a nine-month high supported by expectations the ECB can continue to raise rates to curb inflation, without worrying too much about damaging growth.
Treasury yields were mostly lower in choppy trading as investors looked ahead to next week’s Fed policy meeting.
The yield on 10-year Treasury notes fell 6.8 basis points to 3.455 per cent.
Germany’s 10-year yield was steady at 2.157 per cent.
Crude oil prices slipped on concerns about a global economic slowdown and an expected build in US oil inventories.
US crude futures fell US$1.49 to settle at US$80.13 a barrel, while Brent settled down US$2.06 at US$86.13.
Gold prices pulled back from a nine-month high due to a slight uptick in the dollar and US bond yields, though hopes of slower Fed rate hikes underpinned the market.
US gold futures settled up 0.4 per cent at US$1,935.40 an ounce. — Reuters