US shares trim earlier declines after Brainard’s remarks

US stocks pared earlier declines after Fed Vice Chair Lael Brainard said that it would be appropriate “soon” for the central bank to slow its pace of interest-rate hikes.

The S&P 500 fell 0.1% after struggling for direction earlier in the session. The tech-heavy Nasdaq 100, which is typically more sensitive to interest rates, fell as much as 1.3% before paring declines. Treasury yields climbed, with the 10-year rate hovering around 3.87%.

Brainard, during a Bloomberg event in Washington, said it makes sense for the Fed to move to a “deliberate, data dependent pace” of rate hikes. Earlier, Fed Governor Christopher Waller’s weekend comments wobbled markets after he said policymakers had “a ways to go” before ending interest-rate hikes.

While signs of cooling in US inflation and the prospects of a dovish tilt by the Fed had propelled the S&P 500 to its best week since June, investors on Monday mulled whether the post-CPI euphoria was overblown. Some of the world’s largest money managers are still clinging to risk-off positioning against the threat of entrenched inflation.

“Even the biggest bull would have to say that investors need to be careful about extrapolating last week’s slightly better CPI number into something that is giving investors definitive proof that the inflation is about to decline in a substantial manner over the coming weeks and months,” Matt Maley, chief market strategist at Miller Tabak + Co., wrote.

The bad news is that in an economic moment that remains so uncertain, the data is more likely than not to be messy and contradictory in the months ahead. The pace of decline will be uneven. Moreover, there’s still a long way to go to get to the Fed’s target of 2% average inflation. That’s why Fed governors have been lining up to talk down any market euphoria that a real pivot is in sight.

Meanwhile, Chinese stocks listed in the US extended their rally to a third day, after Joe Biden and Xi Jinping called for reduced tensions between the world’s two biggest economies during a meeting in Bali, Indonesia. The White House said in a statement afterward that Secretary of State Antony Blinken would travel to China.

The DAX Index, Germany’s main equity benchmark, rallied 20% from its September low. It was set to enter a bull market as investors bought shares on optimism that China is easing Covid restrictions and that its relations with the US are improving.