U.S. Stocks Slip Most in Four Weeks as Trump-Fueled Rally Fades

  • Russell 2000 drops 1.1%, halts longest rally in two decades
  • S&P 500, Dow average retreat from all-time highs as banks fall

U.S. stocks fell the most in four weeks as investors speculated that gains sparked by expectations for brisker economic growth under a new administration went too far too quickly.

Financial shares that have paced a three-week surge since the election fell 1.4 percent Monday, after the value of American financial firms was inflated by more than $300 billion since Nov. 8. Consumer discretionary shares slipped after the start of the holiday sales season was lackluster. Utility stocks climbed 2 percent as a rout in bonds eased.

The S&P 500 Index lost 0.5 percent to 2,201.82 at 4 p.m. in New York, halting a four-day advance that left the equity benchmark at a record. It had gained 3.4 percent since the U.S. presidential election on Nov. 8. The Dow Jones Industrial Average slipped 52.80 points to 19,099.34, while the Russell 2000 Index halted a 15-day surge that was the longest since 1996.

“With S&P at new all-time highs there is too much hope for fiscal reflation priced into markets at least in the short-term,” said Ralf Zimmerman, an equity strategist at Bankhaus Lampe KG based in Dusseldorf, Germany. “Investors don’t know anything about the future stimulus and today’s futures declines are also triggered by fading hopes for a meaningful OPEC deal.”

Equities had rallied while bonds plunged on speculation Donald Trump will be able to implement fiscal stimulus to jumpstart growth in the world’s largest economy. Investors will turn attention to U.S. jobs data due Friday for clues on the pace of future interest-rate increases, while OPEC nations continue to work toward a deal to curb production. A referendum Sunday in Italy also has cooled demand for riskier assets.

“People are stepping back and saying the market is a little bit overbought, let’s sit back here and see if we get some follow through” said Matt Maley, an equity strategist at Miller Tabak & Co. LLC in New York. “The OPEC meeting is giving people a little bit of a reason to take a little bit of a breather.”

Backward looking economic figures will have little impact on the likelihood of the December rate decision, as a hike is viewed with increasing certainty, though the data may indicate whether the Federal Reserve intends to implement additional increases next year. The probability of a rate hike in December has now reached 100 percent compared with 68 percent chance at the start of November.

On Tuesday, third quarter GDP growth are released along with information on corporate-profits. Profits have declined in five of the last six quarters and are important as such to see an acceleration in business investment. As the end of the earnings season approaches, 19 companies are reporting this week with many retailers including Tiffany & Co. and Dollar General Corp.

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