Markets wrap: Tech weights on equities as dollar extends rally

The S&P 500 pared most of its earlier gains as a drop in tech offset an advance in defensive industries like utilities and consumer staples. The dollar rose to the highest level since November 2020, while Treasuries fluctuated.

Federal Reserve Chair Jerome Powell and his counterparts at the European Central Bank, Bank of Japan and Bank of England voiced cautious optimism Wednesday that supply-chain disruptions lifting inflation rates around the world would ultimately prove temporary. Traders remained alert to the potential for market disruption should politicians in Washington fail to raise the debt-ceiling in time to avoid a default on U.S. obligations.

"Jitters surrounding elevated levels of inflation and slowing growth are likely to remain for some time," said Fiona Cincotta, senior financial-markets analyst at City Index. "U.S. debt-ceiling discussions could be in focus amid a quiet economic calendar."

The U.S. Treasury is likely to exhaust its ability to borrow as soon as late October, according to the Congressional Budget Office, in the latest warning to lawmakers following their failed efforts to address the debt ceiling this week.

QuickTake: What's the Debt Ceiling and Will the U.S. Raise It?

A majority of investors harbor fears of persistently high inflation, with a 20% pullback in stocks seen as more likely than a 20% rally, according to a Citigroup Inc. survey of clients. Though most expected modest gains next year in the S&P 500, price pressures and a policy reversal by the Fed are big risks, according to the survey of more than 90 pension, mutual and hedge funds this month.

A gauge of U.S. pending home sales rebounded in August to a seven-month high as prospective buyers welcomed more attractive pricing and additional inventory. The figures suggest housing activity is firming after retreating from the record-high levels seen last year.

Some corporate highlights:

- Walgreens Boots Alliance Inc. is weighing an acquisition of Evolent Health Inc., the health-care group that has been under activist investor pressure to consider a sale, according to people familiar with the matter.

- Merck & Co. has agreed to buy drugmaker Acceleron Pharma Inc. for $180 per share, according to people familiar with the matter.

- Boeing Co. rallied after the aerospace giant was upgraded to outperform at Bernstein on prospects of a travel rebound.

- Morgan Stanley slumped after Oppenheimer downgraded the shares, citing a lack of upside to its valuation.

Here are some events to watch this week:

- House Financial Services Committee hearing on the Fed, Treasury's pandemic response, Thursday

- China Caixin manufacturing PMI, non-manufacturing PMI, Thursday

- Univ. of Michigan sentiment, ISM manufacturing, U.S. construction spending, spending/personal income, Friday

Some of the main moves in markets:

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- The S&P 500 rose 0.2% as of 4 p.m. New York time

- The Nasdaq 100 fell 0.1%

- The Dow Jones industrial average rose 0.3%

- The MSCI World index fell 0.3%

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- The Bloomberg Dollar Spot index rose 0.7%

- The euro fell 0.8% to $1.1592

- The British pound fell 0.9% to $1.3416

- The Japanese yen fell 0.4% to 111.98 per dollar

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- The yield on 10-year Treasuries declined one basis point to 1.53%

- Germany's 10-year yield declined one basis point to -0.21%

- Britain's 10-year yield was little changed at 0.99%

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- West Texas Intermediate crude fell 0.9% to $74.60 a barrel

- Gold futures fell 0.7% to $1,725.40 an ounce