Tech Giants Hit by Probe Jitters; Treasuries Climb: Markets Wrap

(Bloomberg) --

Technology giants newly in the crosshairs of regulators led U.S. stocks lower, while speculation the Federal Reserve will warm up to rate cuts spurred a Treasury rally.

The Nasdaq-100 Index extended losses from a record in May to more than 10% as the FAANG cohort of tech companies was said to potentially face federal probes on antitrust activity. Treasury two-year yields dropped to their lowest since 2017 and the dollar fell after James Bullard became the first Fed board member to publicly call for a rate cut amid the trade war.

Selling was heaviest in Facebook Inc., Amazon.com Inc., Alphabet Inc. and Apple Inc. as the companies appeared set to undergo antitrust probes after the U.S. Justice Department and the Federal Trade Commission agreed to split up oversight of technology giants. For investors, any such investigation would represent broadsides at companies that sit at the heart of the bull market.

“The regulatory situation is an overhang and it has long-term negative implications,” said Matt Maley, equity strategist at Miller Tabak & Co. “It creates another headwind in a situation where we have a long list of headwinds.”

After a brutal month for most asset classes except bonds, June began with no let-up in market risks. Besides concern over sweeping investigations into tech behemoths, the latest signs of factory weakness in major economies weighed on investor sentiment. A measure of American manufacturing activity fell in May to the lowest since October 2016.

Bank of America and Citigroup have lowered their U.S. corporate profit forecasts while pointing out the risk of a recession amid a trade war. They’re among the first Wall Street strategists to lower their estimates since President Trump last month escalated a dispute with China and threatened tariffs on all Mexican goods unless the country steps up its fight against illegal immigration.

Here are some notable events coming up:

• Tuesday sees the Reserve Bank of Australia policy meeting, with many expecting an interest-rate cut.
• China President Xi Jinping begins a two-day visit to Russia on Wednesday.
• Theresa May steps down on Friday as leader of the Conservative Party.
• Friday’s U.S. jobs report is projected to show payrolls rose by 190,000 in May, unemployment held at 3.6%, a 49-year low, and average hourly earnings growth sustained a 3.2% pace.

These are the main moves in markets:

Stocks

• The S&P 500 Index declined 0.3% to 2,744.45 as of 4 p.m. New York time, the lowest since March 8.
• The Dow Jones Industrial Average was little changed.
• The Stoxx Europe 600 Index climbed 0.4%.
• The MSCI Asia Pacific Index gained 0.3%.

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%.
• The euro jumped 0.7% to $1.1244.
• The Japanese yen increased 0.2% to 108.07 per dollar.

Bonds

• The yield on 10-year Treasuries fell five basis points to 2.08%.
• Germany’s 10-year yield increased less than one basis point to -0.20%.
• Britain’s 10-year yield declined two basis points to 0.862%.

Commodities

• The Bloomberg Commodity Index dipped 0.3%.
• Gold climbed 1.3% to $1,327.90.20 an ounce.

--With assistance from Paul Allen, Benjamin Purvis, Adam Haigh, Gregor Stuart Hunter, Christopher Anstey, Yakob Peterseil and Todd White.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

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

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