Stocks fell and bonds rose after data showed some softening in the labor market, housing and a gauge of business outlook. Traders also continued to wade through corporate earnings and comments from Federal Reserve speakers.

The tech-heavy Nasdaq 100 underperformed, with Tesla Inc. down about 10 per cent after signaling it will keep cutting prices to stoke demand even after markdowns took a significant toll on profitability. The S&P 500 dropped ahead of Friday’s options expiration. The Cboe Volatility Index, or VIX, halted a six-day streak of declines.

The policy-sensitive two-year yield declined as much as 10 basis points to 4.14 per cent. The dollar retreated against most of its developed-market peers.

Fed Bank of Cleveland President Loretta Mester signaled support for another rate hike to quell inflation while flagging the need to watch recent bank stress that could crimp credit and dampen the economy. Her Dallas counterpart Lorie Logan said inflation has been “much too high,” while outlining measures to watch.

Recurring unemployment benefit claims jumped to the highest level since November 2021, adding to signs that the labor market is beginning to lose momentum. Sales of previously owned homes fell in March by more than forecast, underscoring a housing market that’s still on shaky footing despite some signs of stabilizing. U.S. mortgage rates rose for the first time since early March.

“If the Fed stays the course, broad financial conditions should continue to tighten, the economy should decelerate into recession, and stocks should trade down sharply,” wrote Chris Senyek of Wolfe Research. “On the flip side, the biggest upside risk to our bearish call remains the Fed backing off way too soon! Although, if the Fed fails to sustainably bring down inflation, the ultimate pain will likely be much worse 12-24 months down the road.”

Corporate Highlights:

• International Business Machines Corp. gave a forecast for annual revenue in line with analysts’ projections, delivering a cautiously optimistic signal about technology spending in an uncertain economy.
• AT&T Inc. missed estimates for free cash flow.
• American Express Co. set aside more money to cover souring loans, a move that weighed on earnings.
• D.R. Horton Inc.’s results topped expectations.
• Truist Financial Corp. and Fifth Third Bancorp. reported deposits that were broadly stable in the first quarter as banks weathered the fallout from the collapse of three lenders in March.
• Union Pacific Corp. posted profit higher than analysts’ expectations amid higher prices.

Key events this week:

• PMIs for Eurozone, Friday
• Japan CPI, Friday
• Fed’s Lisa Cook discusses economic research at an event, Friday

Some of the main moves in the market:

Stocks

• The S&P 500 fell 0.6 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.8 per cent
• The Dow Jones Industrial Average fell 0.3 per cent
• The MSCI World index fell 0.4 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.1 per cent
• The euro was little changed at US$1.0964
• The British pound was little changed at US$1.2436
• The Japanese yen rose 0.3 per cent to 134.28 per dollar

Cryptocurrencies

• Bitcoin fell 4 per cent to US$28,070.67
• Ether fell 2.8 per cent to US$1,926.1

Bonds

• The yield on 10-year Treasuries declined six basis points to 3.53 per cent
• Germany’s 10-year yield declined seven basis points to 2.45 per cent
• Britain’s 10-year yield declined nine basis points to 3.77 per cent

Commodities

• West Texas Intermediate crude fell 2.4 per cent to US$77.29 a barrel
• Gold futures rose 0.4 per cent to US$2,015 an ounce