U.S. Stocks Fall, Bonds Mixed Before French Vote: Markets Wrap

(Bloomberg) -- U.S. ended lower in heavy trading, while Treasuries and the dollar were little changed as markets struck a note of caution ahead of this weekend’s French presidential election.

The S&P 500 Index slumped in the final minutes of trading on volume 16 percent above the 30-day average. Stocks ended above session lows after Donald Trump said the White House will present a tax-reform plan next week. The statement to the Associated Press sent the Treasury 10-year yield lower, leaving it unchanged for the day and week. The Bloomberg Dollar Spot Index climbed, paring a second weekly loss. Crude slid below $50 a barrel, while gold advanced.

Trump’s promise for a tax plan next week injected the market with a modicum of hope that the administration will push forward with reforms that appeared to have stalled in recent week. Treasury Secretary Steven Mnuchin on Thursday signaled that tax reform remained a priority. Investors continue to grapple with a spate of geopolitical risk events, with the murder of a policeman on the Champs-Elysees adding to uncertainty before France’s vote.

“The need to hedge the downside risks on the euro without capping the upside potential, has mostly pushed investors toward the currency options through the week,” Ipek Ozkardeskaya, a market analyst at London Capital Group Ltd., wrote in a note. Heightened stock volatility has been spurred by investors’ need to protect against political risk into and following the first round, she said.

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Here are some events that investors will be watching:

• The first round of voting in the French election is on Sunday, and the two leading candidates will run off in a winner-takes-all contest on May 7. Currency desks are gearing up for the event, with memories still fresh from last year’s Brexit vote and U.S. presidential election.
• U.S. Markit manufacturing PMI and Markit services PMI for April will be gleaned for clues about economic growth and outlook
• The annual Spring Meetings of the World Bank Group and the International Monetary Fund bring government officials, central bankers, journalists, academia and the private sector to Washington for briefings on the global economy and international development.

Here are the main markets moves:

Stocks

• The S&P 500 fell 0.3 percent to 2,348.78 as of 4 p.m. in New York. The measure advanced 0.9 percent in the week, the most since Feb. 17.
• The Stoxx Europe 600 rose less than 0.1 percent, trimming a weekly decline to 0.7 percent.

Currencies

• The Bloomberg Dollar Spot Index climbed 0.1 percent after trading most of the session little changed. It’s down 0.2 percent for the week. 
• The yen rose 0.2 percent to 109.099.
• The euro weakened 0.1 percent to $1.0702. Sterling fell 0.1 percent to $1.2799.

Bonds

• The yield on 10-year Treasury notes was unchanged at 2.23 percent on Friday, leaving the rate identical to where it ended the prior week.
• Corporate issuance was muted in the week with $25 billion in three sessions, largely from financials as JPMorgan Chase & Co. Bank of America Corp. and Morgan Stanley all sold debt.
• French 10-year yields were little changed at 0.93 percent. Bunds gained, with the yield on the benchmark due in a decade one basis point lower at 0.24 percent.

Commodities

• West Texas Intermediate fell as investors lost faith that an extension of OPEC-led supply cuts will overcome growing U.S. production and ease a global glut.
• Front-month futures lost 2.2 percent Friday to settle at $49.62 a barrel, the lowest close since March 29. The contract fell 6.7 percent in the week.
• Gold futures rose 0.2 percent to $1,287.20 an ounce, as a measure of the metal’s volatility fell to a 4-year low before the first round of voting in French elections.
• Iron ore futures climbed 5.1 percent.
• London Metal Exchange copper settled unchanged at $5,623 per ton, after swinging between gains and losses.

--With assistance from Sid Verma V. Ramakrishnan Mark Shenk Susanne Barton and Andrea Wong

To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net.

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