Stocks Drop From Records as Bond Rally Quickens: Markets Wrap
A monitor displays an S&P 500 chart on the floor of the New York Stock Exchange in New York, U.S. (Photographer: Michael Nagle/Bloomberg)

Stocks Drop From Records as Bond Rally Quickens: Markets Wrap

U.S. stocks dropped the most in almost three week amid growing anxiety that the spread of Covid-19 variants will upend growth expectations, undoing popular reflation trades. Treasuries gained for an eighth day.

The S&P 500 fell 0.9%, with the economically-sensitive industrial and material sectors helping to lead all 11 industry groups lower. The benchmark index had set all-time closing highs in eight of the last nine trading sessions. Banks were the biggest losers with the U.S. 30-year Treasury yields fell briefly below 1.90% for the first time since February.

Traders are getting edgy over whether the rapid spread of the delta strain will knock back growth and prospects for central bank normalization.

“It feels like we have moved from thinking inflation will be transitory, to fearing growth will be transitory,” said Art Hogan, chief market strategist at National Securities.

Stocks Drop From Records as Bond Rally Quickens: Markets Wrap

Central bank stimulus plans remain critical to the market outlook. While the Federal Reserve mulls the timetable for tapering $120 billion in monthly bond purchases, the European Central Bank stands ready to extend ultra-loose policy. In the culmination of an 18-month review published Thursday, ECB policy makers raised their inflation target to 2% and said they would tolerate moderate overshoots.

“The minutes of the Fed yesterday pointed to a slowing of the bond purchase, though the lower interest rate on the 10-year, which indicated higher demand,” said Kim Forrest, founder and chief investment officer at Bokeh Capital Partners. It “looks like the bond people are ignoring the Fed’s future moves.”

Oil rebounded after a U.S. government report showed rapidly declining inventories and record-high fuel demand in the midst of the peak summer travel season.

Meanwhile, the pandemic’s global death toll has surpassed 4 million as the delta variant spreads, and the World Health Organization urged caution on reopenings worldwide.

Stocks Drop From Records as Bond Rally Quickens: Markets Wrap

For more market commentary, follow the MLIV blog.

Here are some events to watch this week:

  • The Group of 20 finance ministers and central bankers meet in Venice on Friday
  • China PPI and CPI data released on Friday

These are some of the main moves in markets:

Stocks

  • The S&P 500 fell 0.9% as of 4:01 p.m. New York time
  • The Nasdaq 100 fell 0.6%
  • The Dow Jones Industrial Average fell 0.8%
  • The MSCI World index fell 1%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.2%
  • The euro rose 0.5% to $1.1847
  • The British pound fell 0.1% to $1.3785
  • The Japanese yen rose 0.8% to 109.78 per dollar

Bonds

  • The yield on 10-year Treasuries declined two basis points to 1.29%
  • Germany’s 10-year yield was little changed at -0.31%
  • Britain’s 10-year yield advanced one basis point to 0.61%

Commodities

  • West Texas Intermediate crude rose 1.3% to $73.13 a barrel
  • Gold futures were little changed

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