U.S. Stocks Halt Rally as Dollar Falls; Oil Gains: Markets Wrap

(Bloomberg) -- U.S. stocks halted a six-day winning streak as investors debated whether commitments by the Federal Reserve and the Biden administration to let the economy run hot will spark destabilizing inflation.

The S&P 500 Index edged lower from an all-time high after a 5.4% surge this month fueled by signs the Biden administration intends to pass a sizable aid bill while the central bank promises to keep rates pinned near zero. The Nasdaq 100 Index eked out a gain, while small caps notched the longest rally since December 2019. Treasuries advanced and the dollar fell for a third straight session.

Stretched valuations are giving investors pause as they cheer advancing vaccination efforts, rising stimulus prospects and a slowdown in coronavirus infections across the globe. With inflation expectations near the highest since 2013, questions have also begun to be raised about when the so-called reflation trade in bonds could start to threaten equities.

“We are getting to the point where we have to start worrying about the risk of how do we pull back on that stimulus, will it cause the economy to overheat, are these valuations becoming too expensive,” Saira Malik, Nuveen head of global equities, said on Bloomberg TV. “That is something we are going to be grappling with as the year goes on.”

Elsewhere, Brent oil hovered around $60 a barrel on signs the global market is tightening and demand is improving. Bitcoin pared an earlier jump to a record after Tesla Inc. bought $1.5 billion of the cryptocurrency.

Here are some key events coming up:

• Earnings season continues with companies including Cisco Systems, Societe Generale and L’Oreal.
• EIA crude oil inventory report comes Wednesday.
• Sweden will set monetary policy on Wednesday.
• Federal Reserve Chair Jerome Powell will speak on a webinar Wednesday.
• The U.S. consumer price index comes Wednesday.
• Lunar New Year public holidays begin in nations across Asia, with China breaking for a week.
• Bank of Russia’s policy decision comes Friday.

These are the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 4 p.m. New York time.
• The Stoxx Europe 600 Index lost 0.1%.
• The MSCI Asia Pacific Index advanced 0.4%.
• The MSCI Emerging Market Index gained 0.7%.

Currencies

• The Bloomberg Dollar Spot Index dipped 0.5%.
• The euro advanced 0.6% to $1.2118.
• The British pound gained 0.5% to $1.3809.
• The onshore yuan strengthened 0.2% to 6.436 per dollar.
• The Japanese yen strengthened 0.6% to 104.57 per dollar.

Bonds

• The yield on 10-year Treasuries decreased two basis points to 1.15%.
• The yield on two-year Treasuries rose to 0.115%.
• Germany’s 10-year yield was flat near -0.45%.
• Britain’s 10-year yield fell to 0.461%.
• Japan’s 10-year yield advanced less than one basis point to 0.073%.

Commodities

• West Texas Intermediate crude rose 0.6% to $58.32 a barrel.
• Brent crude added 0.9% to $61.12 a barrel.
• Gold futures strengthened 0.1% to $1,836.10 an ounce.

©2021 Bloomberg L.P.