Nasdaq futures fall 1%, bonds fall after rally: Markets wrap

(Bloomberg) — U.S. stock futures and Treasury bonds fell as traders trimmed their bets on interest rate cuts and speculated that the recent rally was overdone.

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Nasdaq futures lost 1.2%. Apple Inc. declined. in pre-market trading after an analyst at Barclays Plc warned that demand for the iPhone was declining. The yield on 10-year Treasury bonds rose nine basis points to 3.97%. Brent crude rose more than 2% after Iran sent a warship to the Red Sea.

The first trading day of the new year brought 2023's scorching rally to a halt after a more than $8 trillion surge in the S&P 500 last year.

“It is not uncommon for markets to pause to absorb a rally of the magnitude they saw in the just-concluded fourth quarter,” said John Stoltzfus, chief investment strategist at Oppenheimer Asset Management. “In fact, it seems logical to us that markets should stop thinking about the sudden rise in stock prices.”

Read more: Here's (almost) everything Wall Street expects in 2024

According to Stoltzfus, US stocks are due for a break, but the upcoming earnings season could see the advance resume.

The dollar rose 0.6%, with almost all emerging countries' currencies trading lower against the dollar. The yen fell in thin trading as investors monitored the situation after the earthquake that struck Japan on Monday.

Bitcoin rose above $45,000 for the first time in almost two years. Anticipation is growing around the expected US approval of an exchange-traded fund that invests directly in the largest token.

In Asia, sentiment took a hit after Chinese President Xi Jinping admitted that some businesses and citizens had a tough 2023 in a rare acknowledgment of the domestic headwinds facing the country.

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Recession signal

Adding to the pressure on Chinese markets, ASML Holding NV, which makes semiconductor manufacturing equipment, canceled shipments of some of its devices to China at the request of US President Joe Biden's administration, people familiar with the matter said.

Despite the ongoing weakness in China, some investors consider the nearly 60% decline a signal to buy Chinese stocks. Nearly a third of the 417 respondents to Bloomberg's latest Markets Live Pulse survey say they will increase their investments in China over the next 12 months.

Main events this week:

• Unemployment in Germany Wednesday

• US Federal Open Market Committee (FOMC) meeting minutes, ISM manufacturing index, jobs, light vehicle sales, Wednesday

• Richmond Fed President Tom Barkin — an FOMC elector in 2024 — speaks Wednesday

• China Caixin Services PMI, Thursday

• Eurozone, S&P Global Eurozone Services PMI, Thursday

• US Initial Jobless Claims, ADP Employment, Thursday

• Eurozone CPI, Producer Price Index, Friday

• US Nonfarm Payrolls/Unemployment, Factory Orders, ISM Services Index, Friday

• Richmond Fed President Tom Barkin — an FOMC elector in 2024 — speaks Friday

Some key movements in the markets:

Stores

• The Stoxx Europe 600 Index was down 0.5% as of 1:26pm London time

• S&P 500 futures fell 0.8%

• Nasdaq 100 futures fell 1.2%

• Dow Jones Industrial Average futures fell 0.6%

• MSCI Asia Pacific Stock Index fell 0.8%

• MSCI Emerging Markets Index fell 0.9%

Currencies

• The Bloomberg Dollar Spot Index rose 0.6%.

• The euro fell 0.8 percent to $1.0961

• The Japanese yen fell 0.8% to 142.00 per dollar

• The yuan in external transactions fell 0.3 percent to 7.1482 per dollar

• The British pound fell 0.7 percent to $1.2642

Digital currencies

• Bitcoin rose 4.4% to $45,564.45

• Ethereum rose 2.5% to $2,396.29

Bonds

• The yield on the 10-year Treasury note rose nine basis points to 3.97%.

• The yield on 10-year German bonds rose seven basis points to 2.10%.

• The UK 10-year bond yield rose 15 basis points to 3.69%.

Goods

• Brent crude rose 2 percent to $78.56 a barrel

• Spot gold rose 0.3 percent to $2,068.51 per ounce

This story was produced with assistance from Bloomberg Automation.

-With assistance from Joanna Ossinger, Zhou Lin, and Tasya Sibahutar.

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