Stocks Fall Most in 2018 as Treasury Yields Climb: Markets Wrap
(Bloomberg) -- The Standard & Poor’s 500 Index declined by the most since September and yields on benchmark Treasuries touched the highest levels since early 2014 as traders gear up for a hectic week of data and policy announcements. The dollar strengthened against all its major rivals.
The Dow Jones Industrial Average also declined by the most in almost five months. The euro retreated as German bonds dropped for a fourth day, while the Stoxx Europe 600 Index inched lower after the MSCI Asia Pacific Index slumped earlier. Treasuries climbed from the lows of the day after data on personal income and spending.
“You’re coming off a relatively strong period, where you’ve had a really sharp move in equity markets from the beginning of the year,” Kevin Caron, a senior portfolio manager at Washington Crossing Advisors, said by phone. “The forward looking return on equities has come down marginally because of the valuation issue, and at the same time, global investors are looking at bond yields which have risen, maybe making global bonds a little more attractive. At some point you would expect to see a rotation out of one and into another."
Janet Yellen’s final policy meeting as Federal Reserve chair will be the main focus of investor attention in what’s shaping up to be another active week for markets still finding their feet after the recent dollar selloff. There’s a string of fresh economic data due, as well as a State of the Union address from President Donald Trump and earnings releases from the world’s biggest tech companies.
The greenback advance came after it capped a seventh week of losses on Friday, while the yen weakened as the Bank of Japan downplayed Governor Haruhiko Kuroda’s comments on stronger inflation, and the British pound declined as pressure built on Prime Minister Theresa May over Brexit.
Elsewhere, U.S. oil fell, though it’s at about its strongest level in five months relative to global benchmark Brent crude as a weaker dollar and falling stockpiles boost the American marker. Metals advanced amid optimism over global growth and the impact of the softer greenback, with zinc soaring to the highest level in more than a decade.
Bitcoin climbed, holding its value above $11,000 even after a heist of about $500 million in a different digital token spurred calls for more cryptocurrency regulation.
Terminal users can read more in our markets blog.
Here are some important things to watch out for this week:
- Federal Reserve policy makers gather for Chair Janet Yellen’s final meeting on interest rates Wednesday before her term ends
- President Trump delivers his first State of the Union address.
- Tech giants Microsoft Corp., Facebook Inc., SAP SE, Alibaba Group Holding Ltd.,Apple Inc., Alphabet Inc. and Amazon.com Inc. will announce earnings. Large-caps McDonald’s Corp., Exxon Mobil Corp., Merck & Co. Inc., Roche Holding AG, Daimler AG, Deutsche Bank AG and Boeing Co. also report.
- U.S. employers probably added more jobs in January than a month earlier, economists forecast before the Friday report.
- Bank of England Governor Mark Carney will speak before the U.K. Parliament’s Economic Affairs Committee in London Tuesday.
- The sixth round of North American Free Trade Agreement talks conclude in Montreal.
- Gauges of Chinese manufacturing and services industries are due Wednesday.
- The euro area’s twin obsessions — growth and inflation — are on display this week. On Tuesday, data may show the economy with a solid expansion at a 0.6 percent quarterly rate. On Wednesday, the core euro-zone inflation report may show an uptick from a year ago to 1 percent this month.
These are the main moves in markets:
- The S&P 500 Index sank 0.67 percent, while the Dow Jones Industrial Average dropped 0.67 percent and the Nasdaq Composite Index fell 0.5 percent as of 4:18 p.m. New York time.
- The MSCI World Index of developed countries sank 0.7 percent, the first retreat in more than a week.
- The MSCI Asia Pacific Index dipped 0.2 percent.
- Japan’s Nikkei 225 Stock Average fell less than 0.05 percent to the lowest in more than three weeks.
- The MSCI Emerging Market Index sank 0.4 percent, the first retreat in more than two weeks and the largest decrease in almost three weeks.
- The U.K.’s FTSE 100 Index gained 0.1 percent.
- The Stoxx Europe 600 Index fell 0.2 percent.
- The Bloomberg Dollar Spot Index jumped 0.3 percent, after posting the biggest increase in more than six weeks.
- The euro fell 0.4 percent to $1.2380, after seeing the largest drop in more than a week.
- The British pound declined 0.6 percent to $1.4069.
- The Japanese yen declined 0.4 percent to 108.98
- The yield on 10-year Treasuries rose four basis points to 2.70 percent, the highest in almost four years on the biggest rise in more than a week.
- Germany’s 10-year yield jumped seven basis points to 0.69 percent, the highest in more than two years on the largest surge in almost three weeks.
- Britain’s 10-year yield rose one basis point to 1.452 percent, touching the highest in a year.
- West Texas Intermediate crude fell 0.9 percent to $65.56 a barrel.
- Gold fell 0.7 percent to $1,339.86 an ounce.
©2018 Bloomberg L.P.