U.S. Stocks Fall, Treasuries Mixed on Powell-Speak: Markets Wrap

(Bloomberg) -- U.S. equities fell the most in two months, while two-year Treasury yields rose as Jerome Powell dented hopes that the Federal Reserve is poised to continue easing after delivering the first interest-rate cut in over a decade.

The S&P 500 Index fell as much as 1.8% after the Fed chairman said the quarter-point cut amounted to a “mid-term policy adjustment,” fueling speculation the central bank is not necessarily at the start of an easing cycle. The measure rebounded after Powell said the Fed hasn’t ruled out further cuts, closing down 1.1%. President Donald Trump said in a tweet "Powell let us down" with the size of the rate cut.

The 10-year yield fell to below 2.01%, while the two-year rate jumped to 1.88%. The dollar advanced to the highest in two months, and gold slid.

Fed fund futures showed less easing is now being priced in by markets that had been expecting almost three quarter-point cuts this year prior to the meeting. The hope for a cycle of cuts had pushed stocks to all-time highs and sent 10-year rates dipping below 2%. Markets turned volatile as Powell signaled the Fed is in no rush to continue with easing, unless warranted by data. The central bank earlier voted, with two officials dissenting, to cut rates as predicted by most investors and economists.

With two of the week’s key events -- the Fed and trade talks -- over for now, investors still have an ongoing slew of corporate results and Friday’s U.S. jobs data to contend with. American delegates wrapped up negotiations with their Chinese counterparts in Shanghai on Wednesday with little evidence of progress toward ending the year-long trade dispute.

Here are some of the key events to watch as the week unfolds:

• The Bank of England policy decision is due Thursday.
• The U.S. July jobs report is due Friday.

Here are the main moves in markets:

Stocks

• The S&P 500 Index fell 1.1%, the most since May 31, as of 4:30 p.m. New York time.
• The Dow Jones Industrial Average lost 1.2% and the Nasdaq 100 Index fell 1.2%.
• Emerging-market equities dropped 0.8%.
• The Stoxx Europe 600 Index gained 0.2%.

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%.
• The euro decreased 0.7% to $1.1077.
• The British pound was little changed at $1.2158.
• The Japanese yen fell 0.2% at 108.80 per dollar.

Bonds

• The yield on 10-year Treasuries fell four basis points at 2.02%.
• The two-year rate spiked three basis points to 1.88%.
• Germany’s 10-year yield dipped one basis point to -0.41%.
• Britain’s 10-year yield rose less than one basis point to 0.63%.

Commodities

• West Texas Intermediate crude fell 0.1% at $57.99 a barrel.
• Gold fell 1.1% to $1,425.40 an ounce.
• The Bloomberg Commodity Index fell 0.2%.

--With assistance from Robert Brand.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net;Jeremy Herron at jherron8@bloomberg.net

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