U.S. Stocks Decline; Dollar, Treasuries Mixed: Markets Wrap

(Bloomberg) -- U.S. equities fell as investors took a cautious approach to a week full of central bank activity. Treasuries edged lower and gold retreated.

The S&P 500 slipped for a second day after Friday’s blow-out jobs report altered market calculus for Federal Reserve rate cuts. Tech and health-care shares led decliners, with Apple Inc. falling 2.1% after a downgrade. U.S.-listed shares of BASF SE tumbled more than 5% after the German company cut its forecast. Shorter-term Treasuries fell and gold slipped fell for a third day, while the dollar edged higher versus major peers.

The main focus for markets this week looks to be Fed Chairman Jerome Powell, who will testify in Congress just days after the latest payroll report signaled that the American economy remains on track. U.S. stocks hit a record last week and a bond rally took yields to multiyear lows amid expectations the Fed will lower interest rates by at least a quarter of a percentage point at its July meeting. Joe "JJ" Kinahan, the chief market strategist at TD Ameritrade, sees a high likelihood of a July cut.

“If they don’t do something, it’s going to be mightily disappointing,” he said. “I think, September, you have high probabilities also -- but there may be a little bit of waiting to see what the data says going into September.”

The Stoxx Europe 600 Index slipped, with Deutsche Bank AG surrendering earlier gains as traders weighed a plan to cut its workforce by one-fifth. The euro fell after German industrial-production data saw a slight pick-up in May. Greek bonds rose amid hope a new government elected over the weekend will prove to be market-friendly.

Elsewhere, oil gained amid heightened geopolitical risks in the Middle East. Emerging-market shares were dragged down by the Asia sell-off. Turkey’s lira fell after President Recep Tayyip Erdogan’s shock decision to replace the country’s central bank governor, which has fueled concern the regulator could lower borrowing costs more than expected.

Here are some key events coming up:

• U.K. Conservative Party members start voting Monday to choose Theresa May’s successor. Front-runner Boris Johnson and Jeremy Hunt will appear at events through the week, including a televised debate on July 9.
• Federal Reserve Chairman Jerome Powell testifies before Congress on monetary policy and the state of the U.S. economy on Wednesday (the House of Representatives) and Thursday (the Senate).
• Fed minutes are due on Wednesday, ECB minutes on Thursday.
• A key measure of U.S. inflation -- the core consumer price index, due Thursday -- is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.
• U.S. producer prices are due on Friday.

Here are the main moves in markets:

Stocks

• The S&P 500 Index decreased 0.5% as of 4 p.m. New York time.
• The Nasdaq 100 lost 0.7% and the Dow Jones Industrial Average fell 0.4%.
• The Stoxx Europe 600 Index declined 0.1%.
• Germany’s DAX Index dipped 0.2%.
• The MSCI Emerging Market Index fell 1.3%, the biggest fall in more than six weeks.

Currencies

• The Bloomberg Dollar Spot Index gained 0.1%.
• The euro fell 0.1% to $1.1218, the weakest in almost three weeks.
• The Japanese yen decreased 0.2% to 108.672 per dollar, the weakest in more than five weeks.
• The Turkish lira declined 1.9% to 5.7392 per dollar, the biggest decrease in two months.

Bonds

• The yield on 10-year Treasuries rose more than one basis point to 2.05%.
• The two-year rate rose three basis points to 1.89%, while 30-year yields fell two basis points to 2.53%.
• Germany’s 10-year yield was flat at -0.366%.

Commodities

• West Texas Intermediate crude was flat near $57.50 a barrel.
• Gold futures slipped 0.4% to $1,394.80 an ounce.

--With assistance from Emily Barrett.

To contact the reporters on this story: Laura Curtis in London at lcurtis7@bloomberg.net;Olivia Rinaldi in New York at orinaldi1@bloomberg.net

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

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