Stocks Slump as Traders Await Next Week's Fed Move: Markets Wrap

(Bloomberg) -- U.S. stocks fell for the third straight day after lackluster retail sales figures fanned concern that consumer spending is cooling, while traders awaited next week’s rate decision by the Federal Reserve. Ten-year Treasury yields tightened.

The drop in retail spending provided a second data point -- after Tuesday’s tepid inflation figures -- to suggest unsteady growth in the world’s largest economy. Trading in S&P 500 Index shares was more than 10 percent below the 30-day average, suggesting investors are taking a wait-and-see attitude.

“The reality of Fed tightening is beginning to weigh on markets even though the impact is not extreme,” Mark Heppenstall, chief investment officer of Penn Mutual Asset Management, said in a message. “Markets have rallied through the tightening process so far, but it will be more and more challenging as the Fed approaches neutral.”

The Stoxx Europe 600 Index retreated from earlier gains, and benchmarks dropped across Asia after the sudden firing of U.S. Secretary of State Rex Tillerson. The euro declined after Mario Draghi’s comment that recent gains weren’t all warranted by economic fundamentals. News that factory output and investment growth in China had unexpectedly accelerated boosted most industrial metals, including copper.

Oil fluctuated after OPEC raised its expectation for supply growth from the U.S. and other producers for a fourth consecutive month. U.S. crude inventories rose more than anticipated last week. Bitcoin dropped to its lowest level in over a month.

Tillerson’s ouster raised concerns of a new guard in the White House that may take a harder line on trade, advancing President Donald Trump’s agenda of imposing tariffs. To replace Tillerson, Trump nominated CIA director Mike Pompeo, an ex-congressman who has endorsed “pushing back against the Chinese threat.” And on Wednesday, the president named economist and CNBC contributor Larry Kudlow to replace Gary Cohn as director of the White House National Economic Council.

These changes come as the administration considers tariffs on a broad range of Chinese imports, with Politico reporting one proposal is to take measures against more than $30 billion of goods a year.

Terminal users can read more in our markets blog.

Here are some of the key things happening this week:

• Inflation data Thursday is a focal point in the euro area.
• Also this week, Germany’s Angela Merkel is inaugurated to a fourth term, and EU27 government officials discuss the European Union’s Brexit position.
• New Zealand GDP data is out Thursday.
• The U.K. is expected to set out retaliation measures today against Russia over a nerve agent attack on its territory. Meanwhile, Russians will go to the polls on Sunday to vote in a presidential election that Vladimir Putin is widely expected to win.

And these are the main moves in markets:

Stocks

• The S&P 500 Index declined 0.6 percent as of 4 p.m. New York time.
• The Stoxx Europe 600 Index fell 0.1 percent to its lowest in a week.
• The U.K.’s FTSE 100 Index declined 0.1 percent.
• Germany’s DAX Index rose 0.1 percent.
• The MSCI Emerging Market Index fell 0.4 percent, its first retreat in a week.

Currencies

• The Bloomberg Dollar Spot Index fell 0.1 percent.
• The euro declined 0.2 percent to $1.237.
• The British pound gained less than 0.05 percent to $1.3968.
• The Japanese yen climbed 0.3 percent to 106.26 per dollar.

Bonds

• The yield on 10-year Treasuries fell three basis points to 2.81 percent.
• Germany’s 10-year yield declined three basis points to 0.59 percent.
• Britain’s 10-year yield fell five basis points to 1.437 percent.

Commodities

• West Texas Intermediate crude gained 0.3 percent to $60.88 a barrel.
• Gold fell 0.1 percent to $1,325.05 an ounce.
• LME copper climbed 0.6 percent to $6,988.50 per metric ton, the highest in more than a week.

--With assistance from Joanna Ossinger Andrew Janes Adam Haigh and Robert Brand

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Andrew Dunn

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