Stocks Sink as Caterpillar, 3% Yields Rattle Bulls: Markets Wrap

(Bloomberg) -- Stocks tumbled as a rout in the shares of industrial and technology companies sent indexes spiraling lower amid a raft of earnings and renewed selling in the bull market’s biggest winners. The 10-year Treasury yield pierced 3 percent for the first time in four years.

The Dow Jones Industrial Average fell for a fifth day, the longest losing streak since March 2017. The sell off accelerated after industrial bellwether Caterpillar Inc. said that the first quarter was its "high water mark" for the year. The Nasdaq 100 Index slumped 2.1 percent, with Alphabet Inc.’s rise in capital spending sending its shares lower 4.5 percent.

Investors also focused on the rising 10-year yield and its implications for other assets. The dollar weakened after hitting the highest since January, while crude slipped back toward $67 a barrel. Gold rallied.

“All of a sudden, rates are pushing 3 percent,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “If rates start to normalize, so is your stock valuation. And I think that’s increasingly what the market is starting to be looking at.”

Investors are weighing the implications of climbing bond yields that have been spurred in part by higher commodity prices and concern surrounding their inflationary impact on the wider economy. But volatility in interest-rate markets remains low and equity price swings are well off the highs seen earlier this year, indicating investors believe rising borrowing costs may not be enough to cause outsized pain to equities -- until now.

Elsewhere, aluminum extended its biggest slump since 2005 after the U.S. signaled Monday it may lift United Co. Rusal sanctions if Oleg Deripaska divests control of the company. Rusal shares in Hong Kong posted their biggest-ever gain.

These are some important events coming up this week:

• U.S. GDP and jobless claims are due.
• Earnings season continues. Among those reporting: Amazon.com, Samsung and Credit Suisse.
• The European Central Bank has a rate decision on Thursday. Investors will watch for any sign that officials are preparing a shift in stimulus plans for their June meeting.
• Bank of Japan announces its latest policy decision Friday and releases a quarterly outlook report.

Terminal users can read more in our markets live blog.

And these are the main moves in markets:

Stocks

• The S&P 500 Index dropped 1.3 percent as of 4:03 p.m. New York time, while the Dow Jones Industrial Average fell 1.7 percent and the Nasdaq Composite Index declined 1.7 percent.
• The Stoxx Europe 600 Index was little changed and the MSCI Asia Pacific Index rose 0.4 percent.
• The U.K.’s FTSE 100 Index gained 0.4 percent, reaching the highest in more than 11 weeks on its sixth consecutive advance.
• The MSCI Emerging Market Index fell 0.3 percent to the lowest in about three weeks.

Currencies

• The Bloomberg Dollar Spot Index dropped 0.2 percent, after reaching the highest in three months.
• The euro rose 0.2 percent to $1.2233.
• The British pound rose 0.3 percent to $1.3980.
• The Japanese yen was little changed at 108.74 per dollar.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.99 percent, after breaking the 3 percent level for this first time 2014.
• Germany’s 10-year yield was little changed at 0.63 percent.
• Britain’s 10-year yield was little changed at 1.54 percent.

Commodities

• West Texas Intermediate crude fell 1.2 percent to $67.80 a barrel, after reaching the the highest in more than three years.
• Gold rose 0.5 percent to $1,332.02 an ounce. 

--With assistance from Liz Capo McCormick

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net, Janine Wolf in New York at jwolf71@bloomberg.net.

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

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