NEW YORK/LONDON: World stock markets closed near record highs and U.S. bond yields fell on Wednesday as some of U.S. President Joe Biden's stimulus efforts appeared to be on the rocks, boosting the appeal of technology stocks as inflation pressures ease.
A little-noticed ruling by Senate parliamentarian Elizabeth MacDonough in May said Democrats can only use "reconciliation" once in a fiscal year to circumvent legislation that requires 60 votes. Democrats passed Biden's $1.9 trillion COVID-19 relief package in March through reconciliation.
Democratic fiscal packages in Congress are rapidly shrinking, leading to a net outcome that inflationary pressures are set to recede, said Sebastien Galy, senior macro strategist at Nordea Asset Management.
The yield on benchmark 10-year U.S. Treasury notes fell 3.9 basis points to 1.4891%, down from 1.528% late on Tuesday.
Yields plunged as traders in part were forced to unwind short positions in Treasuries, said Joe LaVorgna, chief economist of the Americas at Natixis.
"More importantly, the economy is at its peak growth and a lot of what the (Biden) administration wants to do in terms of fiscal stimulus may not be met because of the parliamentarian ruling," LaVorgna said.
MSCI's all-country world index, a U.S.-centric benchmark for global equity markets, closed down 0.2% at 715.57, less than 3 points from its record peak on Tuesday.
On Wall Street, the S&P 500 came within 1 point of its all-time high set in May as big tech rallied along with healthcare stocks.
The Dow Jones Industrial Average slipped 0.44%, the S&P 500 shed 0.18% and the Nasdaq Composite fell 0.09%, as growth stocks closed slightly higher and underpriced value stocks fell.
The market is on hold as everybody wants to trade "meme stocks," which are not part of the major indexes, said Dennis Dick, a proprietary trader at Bright Trading LLC.
"Why is somebody going to trade Apple, trying to make 10% a year, when they can make 10% in five minutes in GameStop?" Dick said.
Attention remained focused on Thursday's release of U.S. consumer price data and a European Central Bank meeting that could reveal how soon policymakers will begin to withdraw support for Europe's economy as the COVID-19 crisis subsides.
The pan-regional STOXX Europe 600 index rose 0.1% to a new record close, but shy of all-time peak on Tuesday. Britain's FTSE fell 0.2% as UK-listed miners slipped under pressure from lower base metal prices.
Air France KLM, Lufthansa and British Airways owner IAG climbed about 3% each after the U.S. Centers for Disease Control and Prevention (CDC) said it was easing travel recommendations on 110 countries and territories.
Overnight in Asia, the MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.4% lower, as did Japan's Nikkei average.
Germany's 10-year Bund yield, which is closely correlated with U.S. Treasuries, extended Tuesday's decline to -0.247%, the lowest since late April, as investors continued to price in a dovish outcome to the ECB policy meeting on Thursday.
Thursday's U.S. consumer price data is expected to show the overall annual inflation rate spiking to 4.7%, worrying many investors who are not persuaded by the Federal Reserves's insistence the spike in prices will be transitory.
Inflation data from China showed its producer price index jumped 9.0% from a year earlier, the highest in over 12 years, on surging commodity prices.
The rise in consumer prices, however, was softer than expected, helping to mitigate concerns. While China's central bank is slowly scaling back pandemic-driven stimulus, top leaders have vowed to avoid any sharp policy turns and keep borrowing costs low.
The Chinese yuan, whose rally to a three-year high last week was propelled in part by speculation Beijing may want a stronger yuan to tame inflationary pressure, ticked up slightly to 6.3869 per dollar.
The dollar held at the lower end of recent gains, with the U.S. dollar index up slightly at 90.148.
The euro nudged higher to $1.2175, while the dollar rose to 109.61 yen.
Deutsche Bank's Currency Volatility Index hit its lowest level since February 2020 on Tuesday, and sank even further on Wednesday.
Oil prices continued to rally on signs of strong fuel demand in Western economies.
Brent crude futures settled unchanged at 72.22 a barrel, while U.S. crude futures fell 9 cents to $69.96 a barrel.
U.S. gold futures settled 0.1% up at $1, 895.50 an ounce.Meanwhile Wall Street ended a see-saw session lower on Wednesday as market participants awaited inflation data for clues as to when the U.S. Federal Reserve might tighten its dovish monetary policy.
The retail "meme stock" craze continued unabated.
All three major U.S. stock indexes reversed earlier gains, but remained range-bound in the absence of any clear market catalysts.
"There's a lull period in terms of news," said Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana. "We're through earnings period and people are waiting for inflation numbers tomorrow, so you have a mixed market where the major averages aren't doing much of anything."
Heavily shorted meme stocks extended their social media-driven rally, with Aethlon Medical soaring 388.2%.
Reddit chatter also helped to lift shares of prison operator GEO Group and World Wrestling Entertainment 38.4% and 10.9%, respectively.
However, other meme stocks such as Clover Health, AMC Entertainment and Bed Bath & Beyond closed lower.
Retail volume has returned to its January peak, according to Vanda Research, as social media forums scramble to identify the next GameStop Corp, the stock that kicked off the phenomenon.
"It feels like alternative stock market," Carlson added. It's an indication of speculation. You can be successful if you get in at the right moment but it's very difficult to play successfully over time."
"I don't think you should read too much regarding the broader market."
GameStop named Matt Furlong as its new CEO ahead of its earnings report, which showed a quarterly loss of $1.01 per share. Its shares fell over 4% in after-hours trading.
U.S. President Joe Biden changed course in ongoing negotiations to reach a bipartisan agreement on infrastructure spending after one-on-one talks with Senator Shelley Capito broke down.
Industrial stocks, which stand to benefit from an infrastructure deal, slid by 1%.
Washington lawmakers passed a sweeping bill designed to boost the United States' ability to compete against Chinese technology, providing funds for research and semiconductor production amid an ongoing chip supply drought. The bill now heads to the House of Representatives.
Even so, the Philadelphia SE Semiconductor index slipped 0.4%.
The Labor Department's consumer price index report due out Thursday will provide another take on inflation amid the recovery's demand/supply imbalance as investors determine whether inflationary pressures, as the Fed asserts, will be transitory.
The Dow Jones Industrial Average fell 152.68 points, or 0.44%, to 34, 447.14; the S&P 500 lost 7.71 points, or 0.18%, at 4, 219.55; and the Nasdaq Composite dropped 13.16 points, or 0.09%, to 13, 911.75.
Among the 11 major sectors in the S&P 500, healthcare gained the most.
Benchmark Treasury yields dropped below 1.5% for the first time since May, weighing on interest-sensitive financials.
Campbell Soup Co missed quarterly profit expectations and slashed its full-year earnings forecast, sending its shares down 6.5%.
Pfizer Inc gained 2.5% after the Biden administration unveiled plans to donate 500 COVID-19 doses to about 100 countries over the next two years, according to a Washington Post report.
Drugmaker Merck & Co rose 2.3% on the heels of its announcement the U.S. government had agreed to buy about 1.7 million courses of the company's experimental COVID-19 treatment, molnupiravir, for about $1.2 billion, if the drug meets regulatory approval.
Declining issues outnumbered advancers on the NYSE by a 1.12-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored decliners.
The S&P 500 posted 38 new 52-week highs and two new lows; the Nasdaq Composite recorded 126 new highs and 14 new lows.
Volume on U.S. exchanges was 11.53 billion shares, compared with the 10.74 billion average over the last 20 trading days._ Reuters