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Nasdaq falls with dollar, oil rises; earnings, Fed in focus

Nasdaq (.IXIC) closed lower on Monday after a choppy session for U.S. equities ahead of a big week of technology earnings reports while oil prices rose and treasury yields edged higher as investors braced for a Federal Reserve interest rate hike.

In currencies, the dollar index, which touched a 20-year high this month, was down slightly and gold also slipped.

On Sunday, U.S. Treasury Secretary Janet Yellen said that while U.S. economic growth was slowing, a recession was not inevitable.

Treasury yields edged higher as investors braced for the Fed to raise rates by an expected 75 basis points this week. Some are worried about the potential for recession.

Investors were also positioning ahead of earnings in big companies such as Apple (AAPL.O), Microsoft (MSFT.O) and (AMZN.O), as well as second-quarter GDP data.

“Right now we’re just in a holding pattern waiting for all those developments to play out,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

“People are probably just taking some risk off ahead of the earnings. We’ve seen interest rates rise a little too so that’s helping some of the value names like banks.”

The Dow Jones Industrial Average (.DJI) rose 90.75 points, or 0.28%, to 31,990.04, the S&P 500 (.SPX) gained 5.21 points, or 0.13%, to 3,966.84 and the Nasdaq Composite (.IXIC) dropped 51.45 points, or 0.43%, to 11,782.67.

Earlier, a widely watched survey showed German business morale falling more than expected in July as high energy prices and looming gas shortages push Europe’s largest economy towards a recession.

But the pan-European STOXX 600 index (.STOXX) finished up 0.13%, MSCI’s gauge of stocks across the globe (.MIWD00000PUS) gained 0.01%.

The German data had weighed on investor moods in Europe along with a slew of downbeat earnings and a survey over the weekend that showed some industrial companies in Germany cutting production in reaction to soaring energy prices.

The gap between yields on two- and 10-year Treasury notes US2US10=RR, a possible signal of a looming recession when the short-end yield is higher than the long end, has been inverted for more than two weeks and was last at -21.5 basis points.

“This is the first meaningful yield curve inversion we’ve had since 2006 for any period of time,” said David Petrosinelli, senior trader at InspereX, adding that this fed into a generally accepted narrative of a slowdown at the very least.

Benchmark 10-year notes last fell 8/32 in price to yield 2.8105%, from 2.781% late on Friday while the 2-year note price last fell 2/32 to yield 3.0266%, down from 2.991% in the previous session.

The dollar index fell 0.253%, with the euro up 0.13% to $1.0223.

The Japanese yen weakened 0.45% versus the greenback at 136.66 per dollar, while Sterling was last trading at $1.2053, up 0.42% on the day.

“Pre-Fed caution is keeping the dollar off its highs. The market is going to be eager to see if the run of softer data has in any way changed the Fed’s hawkish rate path,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC.

“The economy continues to show pretty solid underlying momentum but at the same time, high inflation, rising interest rates, they are certainly having an impact on the economy.”

Oil prices rose on Monday, bolstered by a slightly weaker U.S. dollar while investors seesawed between supply fears and bets rising U.S. interest rates could weaken demand.

U.S. crude settled up 2.11% at $96.70 per barrel and Brent finished at $105.15, up 1.9% on the day.

Spot gold dropped 0.5% to $1,718.69 an ounce as investors positioned themselves ahead of the Fed meeting.

Bitcoin last fell 2.16% to $22,108.16.