U.S. stocks fell while government bonds advanced as traders unwound bets the Federal Reserve will cut interest rates this year.

The Nasdaq 100 dropped 1.4 per cent Monday, sliding for a second day after suffering its worst week since March. Profit taking in the technology sector continued as some of the year’s hottest names including AI-favorite Nvidia Corp. and Facebook-parent company Meta Platforms Inc. dipped. Tesla Inc. slumped 6.1 per cent after Goldman Sachs Group Inc. joined the list of brokers turning less bullish on the electric-vehicle maker following this year’s blistering rally.

“It makes sense that there should be some pullback early-, intermediate-term given how big this move has been, especially relative to the rest of the investment universe,” said Matt Stucky, senior portfolio manager at Northwestern Mutual Wealth Management Co.

Traders are finally relenting on their bets that the central bank will cut rates this year after Fed Chair Jerome Powell last week warned the U.S. may need one or two more rate increases in 2023. Investors have been growing more anxious that central banks determined to extinguish inflation will keep pushing rates higher and risk breaking fragile economies. 

“Bulls should be happy with flat markets, especially in light of what happened over the weekend,” said Alec Young, chief investment strategist at MAPsignals after markets largely shrugged off the biggest threat to President Vladimir Putin’s almost quarter-century grip on power in Russia. “It continues to be a very data-driven market.”

Russian officials met key partners a day after Yevgeny Prigozhin halted the advance of his Wagner mercenary group toward Moscow. Putin condemned leaders of the Wagner mercenary group as traitors in his first public address since the revolt.

Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter, wrote that the political strife in Russia is likely to have little market impact. 

“Looking forward, obviously this injects more geopolitical uncertainty into the world, but as long as commodity prices don’t spike higher, the markets will largely ignore Russian political volatility,” he wrote.

Amid a global bond rally, early gains in Treasuries faded with the yield on the policy-sensitive two-year at 4.74 per cent and the 10-year bond at 3.72 per cent. 

“Markets are in a holding pattern,” said Sinead Colton Grant, global head of investor solutions, BNY Mellon Wealth Management. “They’re waiting for second-quarter earnings to start, which could be the end of the earnings recession, they’re waiting for more context from the Fed—will we get a July rate hike? There’s a lot of information to come.” 

Oil advanced though it lingered below US$70 a barrel, with traders alert to the risk that any prolonged turmoil in Russia could reverberate through global crude markets. The country’s war in Ukraine has already upended trade flows, with major consumers in Asia including China boosting imports of Russian energy. 

Key events this week:

• U.S. new home sales, durable goods, Conference Board consumer confidence, Tuesday.
• U.S. wholesale inventories, goods trade balance, Wednesday.
• Fed to unveil results of annual banking industry stress test, Wednesday.
• Policy panel with ECB’s Christine Lagarde, Fed Chair Jerome Powell, BOJ’s Kazuo Ueda and BOE’s Andrew Bailey speak, Wednesday.
• Eurozone economic confidence, consumer confidence, Thursday.
• U.S. GDP, initial jobless claims, Thursday.
• Atlanta Fed President Rafael Bostic speaks, Thursday.
• China manufacturing PMI, non-manufacturing PMI, balance of payments, Friday.
• U.S. personal income and spending, University of Michigan consumer sentiment, Friday.

Some of the main moves in markets: 

Stocks

• The S&P 500 fell 0.4 per cent as of 4:01 p.m. New York time
• The Nasdaq 100 fell 1.4 per cent
• The Dow Jones Industrial Average was little changed
• The MSCI World index fell 0.3 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro rose 0.1 per cent to US$1.0908
• The British pound was little changed at US$1.2712
• The Japanese yen rose 0.1 per cent to 143.51 per dollar

Cryptocurrencies

• Bitcoin fell 0.3 per cent to US$30,288.72
• Ether fell 2 per cent to US$1,855.83

Bonds

• The yield on 10-year Treasuries declined two basis points to 3.71 per cent
• Germany’s 10-year yield declined four basis points to 2.31 per cent
• Britain’s 10-year yield declined two basis points to 4.30 per cent

Commodities

• West Texas Intermediate crude rose 0.6 per cent to US$69.55 a barrel
• Gold futures rose 0.2 per cent to US$1,932.60 an ounce