Stocks Decline With Dollar as Treasuries Advance: Markets Wrap

(Bloomberg) --

Stocks fell and Treasuries climbed as investors assessed the latest news on trade talks and awaited more clues on monetary policy.

The S&P 500 Index halted a three-day rally after U.S. Secretary of State Michael Pompeo told CNBC that Huawei Technologies Co. isn’t the only Chinese company that poses risks. He also sees the U.S. and China continuing their talks -- at least by phone -- over the next week or 10 days. Later Tuesday, President Donald Trump said he’s not ready to make a deal with China and cited the need for a “big” Federal Reserve rate cut. Benchmark 10-year yields slumped while the dollar dropped from this year’s high. Italian bonds jumped as Prime Minister Giuseppe Conte resigned.

Just a day after markets cheered progress on trade negotiations, investors took a more cautious approach. Trump’s top economic adviser, Larry Kudlow, speaks with business leaders this week amid concerns about a recession, the trade war and whipsawing markets. Pacific Investment Management Co. has reduced its positions in government debt on bets that a breakthrough in U.S.-China trade talks could trigger a violent sell-off, the Financial Times reported. Traders are also gearing up for a keynote speech from Fed Chairman Jerome Powell at the Jackson Hole symposium Friday.

“It’s kind of a choppy environment,” Dan Skelly, head of equity model portfolios at Morgan Stanley Wealth Management, said in a phone interview. “The liquidity in August is going to be pretty poor, so that certainly in my view caps the potential upside, but it does raise the risk that you do have a more pronounced sell-off at some point.”

Read: JPMorgan’s Kolanovic Sees Pivot Back to Stocks by End of August

Wall Street watchdogs handpicked by Trump eased the Volcker Rule’s controversial ban on banks making speculative investments, wrapping up a top deregulatory priority that’s long been sought by the financial industry. Still, bank stocks joined broader market losses.

In corporate news, Home Depot Inc. surged after its results broadly cleared investor expectations -- or at least, were no worse than expected by Wall Street. Beyond Meat Inc. jumped after JPMorgan upgraded the stock to overweight from neutral. Baidu Inc. soared after the China-based Internet company unexpectedly reported revenue growth in its June quarter. Kohl’s Corp. fell on sales that fell short of expectations.

Here are some notable events coming up:

• Minutes of the Fed’s July meeting will provide details on the discussions leading to the first interest-rate cut in a decade when they are released on Wednesday.
• Thursday brings the Bank Indonesia rate decision and press conference with Governor Perry Warjiyo.
• Flash PMIs are due for the euro area on Thursday.
• Kansas City Federal Reserve Bank hosts its annual central banking symposium in Jackson Hole, Wyoming, starting Thursday. Fed Chairman Jerome Powell will give remarks on Friday.

Here are the main moves in markets:

Stocks

• The S&P 500 fell 0.8% to 2,900.51 as of 4 p.m. New York time.
• The Stoxx Europe 600 Index decreased 0.7%.
• The MSCI Asia Pacific Index rose 0.6%.

Currencies

• The Bloomberg Dollar Spot Index declined 0.3%.
• The euro rose 0.2% to $1.1102.
• The Japanese yen increased 0.4% to 106.21 per dollar.

Bonds

• The yield on 10-year Treasuries slid six basis points to 1.55%.
• Germany’s 10-year yield fell four basis points to -0.69%.
• Britain’s 10-year yield dropped two basis points to 0.452%.

Commodities

• The Bloomberg Commodity Index was little changed.
• West Texas Intermediate crude climbed 0.2% to $56.34 a barrel.
• Gold increased 0.3% to $1,516.70 an ounce.

--With assistance from Sybilla Gross, Andreea Papuc, Todd White and Laura Curtis.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@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

©2019 Bloomberg L.P.