U.S. Stocks Halt Comeback Rally While Bonds Jump: Markets Wrap

(Bloomberg) -- U.S. stocks dropped on concern the blistering rally in risk assets overshot economic prospects. Treasuries climbed.

The S&P 500 halted a surge that drove the gauge higher for 2020, led by energy and industrial companies. Small-cap shares underperformed after a 10% advance in six June sessions. The Nasdaq 100 briefly topped 10,000 as Apple Inc. jumped on a news report it’s preparing to announce a shift to its own main processors in Mac computers. Treasury yields sank to as low as 0.8%. The dollar fell for a ninth straight day -- its longest slide since 2006.

After a record-breaking rally that added $21 trillion to global stock markets, technical indicators suggest a pullback is overdue. Sentiment toward U.S. equities swung to extreme confidence from equally extreme fear in less than three months. Nearly 300 stocks in the S&P 500 are trading at prices that exceed their consensus 12-month targets set by individual company analysts, data compiled by Bloomberg show. That’s a swift change from late March, when only two stocks boasted prices higher than analysts forecast.

“When you have an overbought market, it will not take much to have the market consolidate,” said Quincy Krosby, chief market strategist at Prudential Financial Inc. “Whether it is a sideways market or a 5% to 10% pullback, there will be something that ensures we will see a pullback.”

While the easing lockdowns around the globe fueled a stock rally from the lows, the World Bank warned the economy will contract the most since World War II this year. U.S. job openings plummeted in April to the lowest since 2014 and separations remained elevated as the pandemic ripped through the labor market with devastating speed.

What to watch this week:

• The Fed’s next policy decision is Wednesday. Officials are expected to leave rates above zero.
• OECD releases its economic outlook Wednesday, a twice-yearly analysis of the economic prospects of member countries
• Euro-area finance ministers meet Thursday to discuss the EU’s recovery package and Eurogroup presidency succession.

These are some of the main moves in markets:

Stocks

• The S&P 500 dipped 0.8% as of 4 p.m. New York time.
• The Stoxx Europe 600 Index fell 1.2%.
• The MSCI Asia Pacific Index rose 0.7%.

Currencies

• The Bloomberg Dollar Spot Index decreased 0.1%.
• The euro climbed 0.4% to $1.1334.
• The Japanese yen appreciated 0.6% to 107.76 per dollar.

Bonds

• The yield on 10-year Treasuries decreased five basis points to 0.82%.
• Germany’s 10-year yield climbed one basis point to -0.31%.
• Britain’s 10-year yield rose less than one basis point to 0.336%.

Commodities

• The Bloomberg Commodity Index climbed 0.1%.
• West Texas Intermediate crude increased 1.6% to $38.80 a barrel.
• Gold climbed 0.9% to $1,720 an ounce.

©2020 Bloomberg L.P.