Cyclicals Weigh on Stocks; Treasury Curve Flattens: Markets Wrap

(Bloomberg) -- Stocks retreated after hawkish remarks from Federal Reserve officials and mounting concern that another wave of the pandemic in Europe could spur more lockdowns. 

Economically sensitive companies like energy, financial and industrial shares fell, while the technology-heavy Nasdaq 100 outperformed major benchmarks. The Treasury curve flattened after two members of the central bank’s board said the Fed may need to consider speeding up the reduction of its bond-buying program amid strong economic growth and rising inflation. The dollar rose.

While equities are hovering near records, propped up by robust earnings, a virus resurgence could stall the economic recovery at a time when inflation is raging. Austria became the first western European country to impose widespread restrictions. Parts of Germany also closed non-essential businesses, while the Netherlands has already ordered shops and bars to close early.

“It’s been another week of stocks defying gravity in a tense environment,” said Callie Cox, senior investment strategist at Ally Invest. “The road hasn’t been easy, though. Investors are still digesting the risk of runaway inflation, along with a Covid spike and a new wave of restrictions in Europe.”

President Joe Biden’s signature plan to expand the social safety net, address climate change and rewrite tax policies passed the House Friday morning as Speaker Nancy Pelosi united fractious Democrats to send the legislation to the Senate, where its fate remains uncertain.

Read: Virus May Prove Elephant in The Room That Strategists Missed

Oil logged its biggest weekly drop since August amid renewed prospects for lockdowns just as key consuming nations look to add emergency supply to the market. 

Some corporate highlights:

• Covid-19 booster shots from Pfizer Inc. and Moderna Inc. received unanimous backing for use in all U.S. adults from public-health advisers.
• Boeing Co. is further slowing down the production of 787 Dreamliners, Dow Jones reported.
• Read: Boeing 787 Oversight by FAA Needs Watchdog Review, Lawmakers Say
• Foot Locker Inc. reported sales that missed estimates as a supply-chain crunch pressures the sneaker retailer ahead of the holiday shopping season.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 4 p.m. New York time
• The Nasdaq 100 rose 0.5%
• The Dow Jones Industrial Average fell 0.7%
• The MSCI World index fell 0.3%

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.7% to $1.1288
• The British pound fell 0.4% to $1.3441
• The Japanese yen rose 0.2% to 113.99 per dollar

Bonds

• The yield on 10-year Treasuries declined five basis points to 1.54%
• Germany’s 10-year yield declined seven basis points to -0.34%
• Britain’s 10-year yield declined five basis points to 0.88%

Commodities

• West Texas Intermediate crude fell 3.7% to $76.10 a barrel
• Gold futures fell 0.7% to $1,851.30 an ounce

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