U.S. Stocks Fade After Fed Announces Repo Cuts: Markets Wrap

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Vildana Hajric

14 Feb 2020, 05:24 AM IST

U.S. Stocks Fade After Fed Announces Repo Cuts: Markets Wrap

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

(Bloomberg) -- U.S. equities had a turbulent Thursday, fluctuating between gains and losses on mixed news about the coronavirus outbreak, only to fade after the Federal Reserve Bank of New York said it will further shrink repurchase agreement operations.

The Fed news late in the trading day erased what had been a small gain for S&P 500 Index, which closed lower for the first time this week. The benchmark had bounced back from session lows after the World Health Organization said a surge in coronavirus diagnoses didn’t necessarily indicate a spike in infections.

China recently deployed a revised methodology to diagnose the virus, sending the number of confirmed cases soaring, but many of those cases could be days or weeks old, according to the WHO. Traders are still trying to gauge the outbreak’s effect on the economy.

“It’s too early to tell the overall impact on U.S. markets. We seem to continue to be strong and U.S. consumers continue to be strong,” Chris Gaffney, president of world markets at TIAA, said by phone. “The question now is, how quickly can the virus get under control and can China limit the extent and get things back to normal as quickly as possible?”

The New York Fed said it would shrink repo operations starting with Friday’s overnight offering. The Fed has been conducting repo offerings and Treasury-bill purchases in a bid to keep control of short-term interest rates and bolster bank reserves. The efforts had calmed markets since a September spike. Treasuries trimmed their gains for the day.

The euro traded near the lowest since 2017, while the U.K. pound gained and gilts retreated after Sajid Javid quit as Chancellor of the Exchequer. The FTSE 100 Index also declined.

Earlier, stock gauges in Japan, Shanghai, Hong Kong and South Korea all declined, though shares in Australia edged higher. Oil climbed even as the International Energy Agency said the coronavirus means global demand will drop this quarter for the first time in over a decade.

Here are some key events coming up:

China and the U.S. on Friday are scheduled to lower tariffs on billions of dollars of respective imports as part of the trade deal signed last month.

These are the main moves in markets:

Stocks

The S&P 500 Index decreased 0.2% to 3,374.18 as of 4:01 p.m. New York time.

The Stoxx Europe 600 Index was little changed at 431.08.

The U.K.’s FTSE 100 Index declined 1.1% to 7,452.03, the largest drop in almost two weeks.

The MSCI Emerging Market Index dipped 0.4% to 1,105.07.

Currencies

The Bloomberg Dollar Spot Index was little changed at 1,207.10.

The euro declined 0.3% to $1.0841, the weakest in almost three years.

The British pound advanced 0.7% to $1.3049, the strongest in almost two weeks on the largest rise in almost two weeks.

The offshore yuan weakened 0.2% to 6.9885 per dollar.

The Japanese yen strengthened 0.3% to 109.79 per dollar, the largest rise in almost two weeks.

Bonds

The yield on 10-year Treasuries declined two basis points to 1.61%.

The yield on two-year Treasuries fell less than one basis point to 1.44%.

Germany’s 10-year yield decreased one basis point to -0.39%.

Britain’s 10-year yield gained four basis points to 0.652%, the highest in more than four weeks.

Commodities

West Texas Intermediate crude increased 0.8% to $51.59 a barrel, the highest in two weeks.

Gold strengthened 0.6% to $1,576.11 an ounce, the highest in more than a week on the largest gain in a week.

LME copper advanced 0.3% to $5,764 per metric ton, the highest in almost three weeks.

--With assistance from Chester Yung, Cormac Mullen, Livia Yap, Adam Haigh and Yakob Peterseil.

To contact the reporter on this story: Vildana Hajric in New York at vhajric1@bloomberg.net

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