U.S. stocks oscillated between gains and losses throughout a volatile session, with technology shares still under pressure after last week’s hawkish central bank turn. Treasuries slumped, with the global bond market digesting the Bank of Japan’s sudden increase in its yield trading band.

The S&P 500 ended the session with a modest gain, snapping a four-day losing streak. The tech-heavy Nasdaq 100 fell for the fifth day, its longest stretch of declines since October. With few macro catalysts before the end of the year, swings are liable to pick up, as stocks witnessed on Tuesday.

Fresh economic data showed new U.S. home construction continued to decline in November and permits plunged, an indication that Federal Reserve tightening is serving its purpose. However, closing prices climbed in the third quarter, and the Fed will continue to raise rates if housing remains costly, which could be detrimental for risk assets in the long-term. Investors are also awaiting earnings from FedEx Corp. and Nike Inc. after the markets close.

Treasuries broadly held losses, with the 10-year rate climbing to around 3.69 per cent. Yields rose after a hawkish move from the Bank of Japan sent the yen soaring more than 4 per cent against the dollar at one point. Analysts reckon more losses lie ahead as Japanese investors — major players in U.S. and European debt — have more incentive now to bring money home.

Until now, the BoJ has been an outlier among central banks, most of which have rapidly tightened policy. The Japanese monetary authority adjusted its yield curve control program to allow 10-year borrowing costs to rise to around 0.5 per cent, versus the previous 0.25 per cent upper limit, bucking forecasts for no change at its policy meeting. 

“Tighter BoJ policy would remove one of the last global anchors that’s helped to keep borrowing costs at low levels more broadly,” Deutsche Bank analysts told clients, noting the BoJ move had come as markets were “already reeling” from the European Central Bank and Federal Reserve’s hawkishness last week.

Many economists now expect the BOJ to raise interest rates next year, joining the Fed, the ECB and others after a decade of extraordinary stimulus. 

However, Evercore ISI’s Krishna Guha and Peter Williams said elevated FX hedging costs mean Japanese investors have already stopped being net buyers of U.S. government debt. The BoJ as the biggest holders of Japanese government bonds would take most of the loss from duration risk on its own balance sheet, they wrote in a note.

“In other words, this is a disruptive jolt but not a cataclysmic event for global markets,” they said. “The BoJ may be demonstrating that it is actually possible to exit yield curve control in phases in a manageable way, though one that still has material implications for markets.”

In commodity markets, the weaker dollar gave gold prices a boost, while West Texas Intermediate crude oil futures rose above  US$75 a barrel.

Key events this week:

• EIA Crude Oil Inventory Report, Wednesday
• U.S. existing home sales, U.S. Conference Board consumer confidence, Wednesday
• U.S. GDP, initial jobless claims, U.S. Conf. Board leading index, Thursday
• U.S. consumer income, new home sales, U.S. durable goods, PCE deflator, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.1 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 0.1 per cent
• The Dow Jones Industrial Average rose 0.3 per cent
• The MSCI World index fell 0.7 per cent

Currencies

• The Bloomberg Dollar Spot Index fell 0.7 per cent
• The euro was little changed at  US$1.0615
• The British pound rose 0.2 per cent to  US$1.2171
• The Japanese yen rose 3.8 per cent to 131.75 per dollar

Cryptocurrencies

• Bitcoin rose 1.6 per cent to  US$16,858.48
• Ether rose 3.1 per cent to  US$1,212.79

Bonds

• The yield on 10-year Treasuries advanced 10 basis points to 3.69 per cent
• Germany’s 10-year yield advanced 10 basis points to 2.30 per cent
• Britain’s 10-year yield advanced nine basis points to 3.60 per cent

Commodities

• West Texas Intermediate crude rose 1.2 per cent to  US$76.09 a barrel
• Gold futures rose 1.7 per cent to  US$1,827.90 an ounce