U.S. Stocks Reverse Gains After Fed, Ryan Comments as Bonds Gain

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Stocks tumbled in the last 90 minutes of trading, with the Dow Jones Industrial Average giving up a 198-point gain as traders assessed the path for interest rates and weighed the likelihood of tax reform by the Trump administration.

The S&P 500 dropped 0.3 percent to 2,352.95 at 4 p.m. in New York. The benchmark was little changed on Tuesday, with volatility dropping for the first time in four sessions. The Dow Jones Industrial Average lost 0.2% to 20,648.15.

  • Banks and energy companies paced the late-session swoon, with the S&P 500 Financial Index going from up more than 1% at around 10 a.m. in New York to down 0.7% by the close
  • Utility and real-estate firms only groups higher as 10-year Yield drops 3 basis points after Federal Reserve minutes released
  • House Speaker Paul Ryan said in a Q&A event that tax reform could take longer than health care overhaul, according to Reuters
  • Volume in SPY jumped to highest of day between 3:00 and 3:30 p.m. to almost three times the average during that period
    • Total shares traded: 7.5 billion, most in more than two weeks
  • Potential that Fed will halt reinvestments sooner than expected, as well as continued discord in Washington, weighing on investors, says Jonestrading global strategist Yousef Abbasi
  • China’s President Xi Jinping and U.S. President Donald Trump scheduled to meet today
  • “The U.S. market looking expensive compared to its global peers,” Citigroup Inc.’s chief U.S. equity strategist Tobias Levkovich wrote in a report to clients. Still, valuations “look more reasonable compared to bond yields. While a strong U.S. dollar may prove a drag on profits, easing credit conditions bode well for future economic growth, he says
    • S&P 500 has traded above 17.6 times its estimated earnings in April, near a 15-year high, while the ratio stands at about 16 times for the MSCI ACWI Index
  • Bloomberg Intelligence Equity Strategists Gina Martin Adams and Peter Chung mirror Levkovich’s view, saying that stocks are becoming expensive relative to historical valuations, but they remain cheaper than bonds based on earnings and interest rates
    • Most Federal Reserve officials said they backed a policy change that would begin shrinking the central bank’s $4.5 trillion balance sheet
    • Private payrolls climbed by 263,000 (forecast was 185,000) on solid gains in construction and manufacturing and at small businesses
    • American service companies expanded in March at the slowest pace in five months; ISM’S non-manufacturing index eased to 55.2 (forecast was 57)
  • EARNINGS (S&P 500)
    • After-market Wednesday: Bed Bath & Beyond (BBBY)
    • Pre-market Thursday: Constellation Brands (STZ), CarMax (KMX)
  • Europe Market
    • Stoxx Europe 600 inched higher for second gain this week as oil companies and basic resource suppliers climbed, offsetting a 1% decline in carmakers

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