Stocks Fall, Reversing Gains After Record Surge: Markets Wrap

(Bloomberg) -- U.S. stocks sank, retreating from all-time highs as commodities producers and industrial shares took a hit with oil and metals in decline. Treasuries rose amid Congressional talks to avert a government shutdown Friday.

All major equity gauges were lower. The Dow Jones Industrial Average fell almost 300 points from its intraday high of 26,086.12 after blowing past the round-number milestone early in the session. The S&P 500 Index’s drop left it more than 1 percent lower than its session high. The dollar was little changed after an earlier gain.

The Stoxx Europe 600 Index climbed, tracking an advance in the MSCI Asia Pacific Index after Hong Kong stocks hit a record. Emerging-market stocks jumped, consolidating at the highest level in almost a decade.

The recent climb by equities, spurred in part by synchronized global economic growth, has some investors wondering if there’s too much short-term froth in the market.

“This is going to be a philosophical question within the market, in terms of how much higher earnings growth from tax cuts is worth in terms of valuation, and how much is it worth just purely on a dollar per share earnings basis,” Jurrien Timmer, director of global macro at Fidelity Investments, said by phone. “I think that the market’s trying to figure that out, and on top of that you have the classic momentum story.”

Investors are increasingly on alert for potential threats to the risk-on mood. As earnings season picks up steam, corporate results are set to be the big focus in Europe ahead of central bank meetings in the U.S., Japan and Europe before the end of the month.

Meanwhile,  the yen climbed for a sixth straight day despite a warning from Japan’s finance minister about excessively rapid moves in the currency market. And bitcoin joined a slump in cryptocurrencies, tumbling nearly 20 percent to nearly $11,192.

Terminal users can read more in our markets blog.

Here’s what to watch out for this week:

• Earnings season ramps up: Taiwan Semiconductor Manufacturing Co., ASML Holdings NV, Bank of America Corp. and Goldman Sachs Group Inc. are among some notable releases.
• Industrial production in the U.S. probably increased in December, a report may show Wednesday, completing a solid year for manufacturing.
• U.S. housing starts probably slipped in December for the first time in three months as frigid winter weather impeded work, forecasts show ahead of Thursday’s release.
• The Bank of Canada’s interest-rate decision comes Wednesday. Monetary policy announcements are also this week due in South Korea, South Africa and Turkey.
• China releases fourth quarter GDP, December industrial production and retail sales Thursday.

And these are the main moves in markets:

Stocks

• The S&P 500 dipped 0.4 percent to 2,776.44.
• The Stoxx Europe 600 climbed 0.1 percent.
• The MSCI All-Country World Index fell 0.1 percent.
• The MSCI Emerging Market Index jumped 0.6 percent to a record.

Currencies

• The Bloomberg Dollar Spot Index was essentially unchanged, erasing an earlier advance.
• The euro was flat at $1.2264.
• The British pound was little changed at $1.3794.
• The Japanese yen added 0.1 percent to 110.39 per dollar.

Bonds

• The yield on 10-year Treasuries slipped less than one basis point to 2.5407 percent.
• Germany’s 10-year yield decreased three basis points to 0.562 percent.
• Britain’s 10-year yield fell two basis points to 1.303 percent.

Commodities

• Gold dipped 0.1 percent to 1,338.90 an ounce.
• West Texas Intermediate crude fell 0.8 percent to $63.78 a barrel, the first retreat in more than a week.

--With assistance from Cormac Mullen Samuel Potter and Sarah Ponczek

To contact the reporters on this story: Eric J. Weiner in New York at eweiner12@bloomberg.net, Kailey Leinz in New York at kleinz1@bloomberg.net.

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner

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