U.S. Stocks Fall With Treasuries, Dollar Climbs: Markets Wrap

(Bloomberg) -- U.S. stocks halted a six-day rally as disappointing results from Walmart Inc. weighed on major indexes as the dollar pushed higher. Treasuries fell amid a heavy slate of U.S. debt issuance, with short-end auctions drawing some of the highest yields in almost a decade.

The S&P 500 Index slipped below its average price for the past 50 days. Walmart sank the most since 1988, while a rally in chipmakers boosted the Nasdaq 100 Index. The Treasury’s auctions of two-year notes and three- and six-month bills went off at rates unseen since 2008, while the 10-year rate was up to 2.89 percent. The greenback gained versus major peers.

The U.S. Treasury on Tuesday sold $179 billion of securities as it works to rebuild its cash balance. Surging rates catalyzed one of the steepest equity selloffs in years two weeks ago. While investors seem to have adjusted to 10-year rates at a four-year high, the deluge of supply could push yields higher, weakening the case for owning stocks at elevated valuations.

While speculators are turning bearish, money managers are looking at the highest U.S. yields in years as a buying opportunity in a world where shorter-term Japanese and German notes still carry negative yields. Investors will also get to parse minutes this week from the most recent meetings of both the Federal Reserve and the European Central Bank.

The U.S. stock market only had a taste of the potential damage from higher bond yields, with the biggest test yet to come, according to Morgan Stanley. “Appetizer, not the main course,” is how the bank’s strategists described the correction of late January to early February.

In Europe, the Stoxx 600 index edged higher after a pullback in equities emerged in Asia following several days of increases. Benchmarks in Japan and South Korea slid more than 1 percent. The yen weakened. Elsewhere, WTI oil traded in New York climbed above $62 a barrel for the first time in more than a week. Bitcoin broke above $11,500, almost double its intraday low from just two weeks ago.

Terminal users can read more in our markets blog.

Here are some key events scheduled for this week:

• The Federal Reserve will release minutes on Wednesday of its Jan. 30-31 meeting, Janet Yellen’s last as chair, where officials kept the rate unchanged.
• Fed policy makers speaking this week include New York Fed President William Dudley and Atlanta Fed President Raphael Bostic. Cleveland Fed President Loretta Mester is among speakers at the U.S. Monetary Policy Forum in New York City. 
• Companies announcing earnings this week include Glencore, Woolworths, Barclays and Royal Bank of Scotland.
• Chinese markets reopen on Thursday after holidays.

These are the main moves in markets:

Stocks

• The S&P 500 fell 0.6 percent as of 4 p.m. in New York.
• Walmart sank 10 percent and Home Depot was little changed after its results.
• The Nasdaq Composite Index added 0.2 percent.
• The Stoxx Europe 600 Index rose 0.6 percent.
• The MSCI Asia Pacific Index sank 0.8 percent, the first drop in more than a week.
• The MSCI Emerging Market Index declined 0.5 percent, the biggest decline in more than a week.

Currencies

• The Bloomberg Dollar Spot Index increased 0.6 percent to the highest in a week.
• The euro sank 0.6 percent to $1.2337, the lowest in more than a week.
• The Japanese yen sank 0.6 percent to 107.262 per dollar.
• South Africa’s rand dipped 0.7 percent to 11.753 per dollar.
• The MSCI Emerging Markets Currency Index decreased 0.3 percent.

Bonds

• The yield on 10-year Treasuries increased one basis point to 2.89 percent.
• The 2-year yield rose three basis points to 2.22 percent, the highest since 2008.
• Germany’s 10-year yield fell less than one basis point to 0.73 percent.

Commodities

• West Texas Intermediate crude rose less than 0.4 percent to settle at $61.90 a barrel, the highest in two weeks.
• Gold futures decreased 1.7 percent to $1,332.70 an ounce.

--With assistance from Todd White and Kailey Leinz

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net, Brian Chappatta in New York at bchappatta1@bloomberg.net.

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Jeremy Herron

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