Stocks Cap Worst Month of Year, Treasuries Surge: Markets Wrap

(Bloomberg) --

U.S. stocks extended a weekly loss to the worst since Christmas, while Treasuries rallied a fourth day as the Trump administration’s trade spats intensified. Oil tumbled.

The S&P 500 also capped its worst month of the year, bringing its May decline past 6.5% after President Donald Trump threatened to place escalating tariffs on Mexico. The Dow Jones Industrial average careened to a sixth weekly loss, the longest slump since 2011. The Mexican peso tumbled more than 2%, while the yen jumped.

The 10-year Treasury yield was poised for the biggest weekly slide since 2014 as traders fully priced in two rate cuts for the year amid angst over the threat of a recession. The credit market’s fear gauges moved by the most in almost three weeks to show the riskiest high-grade and junk bond markets since January.

“When you get a piece of bad news, you take a breath and you try to understand is it as bad as it seems. This one seems pretty bad,” Steve Chiavarone, a portfolio manager with Federated Investors, said in an interview at Bloomberg’s New York headquarters. “There’s just a level of unpredictability that was introduced last night that I don’t think is helpful to the markets.”

The latest move by the self-described Tariff Man would put 5% American duties on all Mexican imports on June 10, rising to 25% in October unless Mexico halts “illegal migrants” heading to the U.S. Evidence emerged Friday that economic growth is holding up when a crucial measure of U.S. inflation watched by the Federal Reserve picked up in April for the first time this year and Americans’ spending and incomes topped forecasts.

Trump’s Mexico declaration and a Bloomberg report that China is planning to restrict rare-earths exports leave markets set for a turbulent end to what’s been a rough month for global stocks. Treasuries have benefited from haven demand, with yields on 10-year notes down to 2.15% Friday compared with 2.50% at the start of the month.

Elsewhere, gold climbed to a two-week high while oil slumped to less than $54 a barrel in New York amid concerns about global demand.

These are the main moves in markets:

Stocks

• The S&P 500 Index sank 1.3% at 4 p.m. in New York.
• The Dow average lost 1.4% and the Nasdaq 100 slid 1.5%.
• The Stoxx Europe 600 Index dropped 0.8% to the lowest in 15 weeks.
• The MSCI Emerging Market Index gained 0.3%.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The euro advanced 0.4% to $1.1169, the first advance in a week.
• The Japanese yen jumped 1.1% to 108.48 per dollar.
• The offshore yuan declined 0.1% to 6.93 per dollar.

Bonds

• The yield on 10-year Treasuries decreased eight basis points to 2.14%, capping the biggest weekly decline since December 2014.
• The yield on two-year Treasuries declined 13 basis points to 1.93%.
• Germany’s 10-year yield fell two basis points to -0.20%, the lowest on record.
• Japan’s 10-year yield declined two basis points to -0.094%, the lowest in almost three years.

Commodities

• West Texas Intermediate crude decreased 5.9% to $53.26 a barrel, the lowest since February.
• Gold gained 1.3% to $1,304.81 an ounce, the highest in seven weeks.

--With assistance from Adam Haigh, John Ainger and Yakob Peterseil.

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Robert Brand

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