Late Push Sends Nasdaq to Record High; Bonds Gain: Markets Wrap

(Bloomberg) -- The global rally in risk assets that sent U.S. stocks to a 12-week high sputtered on Tuesday, with the S&P 500 swinging between gains and losses before closing higher for a third consecutive day.

Advances in megacap tech shares helped support the Nasdaq indexes, pushing them to fresh records for a second straight day. Italian bonds tumbled after the nation’s premier pledged a raft of populist measures. Crude oil reversed early losses to close higher for the first time in four days, while the dollar also gained.

“People are somewhat cautious,” Nick Kalivas, senior equity product strategist at Invesco ETFs, said in an interview at Bloomberg’s New York headquarters. “Not only are they worried about rising rates, but then they’re worried about what’s going on with the economy. That’s going to cause the market to kind of have this choppy, slow grind higher.”

The outlook for global equities had taken an upward turn in recent sessions, not least because stronger-than-expected data from the U.S. showed the world’s largest economy is in rude health. It’s a relief to investors after weeks of turmoil, though with President Donald Trump stepping up his aggressive trade policies and populists poised to start governing in Italy, there remain plenty of reasons for caution.

“You have good fundamental data, whether it be on the macro side or the micro side, in terms of earnings, you have different issues buffeting from a headline perspective, and then you have underlying fiscal policy as stimulative and monetary policy is more restrictive than it has been,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co, said by phone.

Italian bonds declined for the first time since they blew up a week ago as Prime Minister Giuseppe Conte pledged in his maiden speech to pursue a program of fiscal expansion. The euro recovered after he later said that an exit from the shared currency is not under discussion and has never been a target for this government.

Brent futures for August settlement fell earlier beneath its 50-day moving average for the first time since April 4. Brent traded at a more than $9 premium to West Texas Intermediate for the same month. The broader dollar touched a fresh monthly high after better-than-expected U.S. data.

The South African rand weakened, yields on benchmark bonds rose and retail and banking stocks fell as a report showed that the country’s economy shrank the most in nine years in the first quarter.

Terminal users can read more in Bloomberg’s Markets Live blog.

These are some key events to watch this week:

• Reserve Bank of India rate decision on Wednesday.
• U.S. trade balance and Australia GDP also out on Wednesday.
• On Thursday, Japanese Prime Minister Shinzo Abe meets with U.S. President Trump at the White House to discuss the planned U.S. summit with North Korea’s Kim Jong Un.
• Also on Thursday, euro-zone GDP.
• Turkey rate decision is due on Thursday.
• G-7 Leaders’ Summit starts in Quebec Friday through to June 9.

These are the main moves in markets:

Stocks

• The S&P 500 Index rose 0.07 percent to 2,748.80, the Dow Jones Industrial Average was little changed at 24,799.98 and the Nasdaq Composite Index increased 0.4 percent to a record 7,637.86 as of 4:07 p.m. in New York.
• The U.K.’s FTSE 100 Index fell 0.7 percent.
• The MSCI Emerging Market Index dropped 0.2 percent.
• Japan’s Nikkei 225 Stock Average gained 0.3 percent to the highest in more than a week.

Currencies

• The Bloomberg Dollar Spot Index rose 0.1 percent.
  The euro rose 0.1 percent to $1.1714.
• The British pound gained 0.6 percent to $1.3388.
• The Japanese yen strengthened 0.1 percent to 109.72 per dollar.

Bonds

• The yield on 10-year Treasuries fell two basis points to 2.91 percent.
• Italian 10-year yields surged 25 basis points to 2.79 percent.

Commodities

• West Texas Intermediate crude increased 0.8 percent to $65.28 a barrel.
• Gold rose 0.4 percent to $1,297.49 an ounce, the first increase in four days.

--With assistance from David Marino.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Janine Wolf in New York at jwolf71@bloomberg.net

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

©2018 Bloomberg L.P.