U.S. Stocks Drop Most Since May, Bond Rout Worsens: Markets Wrap

Updated on
  • S&P 500 slides below 50-day moving average as selloff deepens
  • Dollar softens as the pace of hiring in the U.S. slows

RBC Says Monetary Policy Will Remain Loose in Europe

The hawkish tone from developed-nation central banks continued to roil financial markets, with U.S. stocks falling the most in seven weeks, Treasury yields rising to levels last seen in May and crude settling below $46 a barrel.

The 10-year yield climbed to 2.37 percent, with DoubleLine Capital’s Chief Executive Officer Jeffrey Gundlach saying the selling has only just begun. The S&P 500 Index closed below its 50-day moving average for the first time in seven weeks, with yield-sensitive shares leading losses. The dollar weakened following a private report that showed the pace of U.S. hiring moderated before Friday’s government payrolls data. The yield on benchmark German bunds hit the highest since January 2016.

Central banks from Asia to Europe and the U.S. have struck a more hawkish tone in the past few weeks as they seek to remove nearly a decade of accommodation. The rise in yields has started to weigh on equity markets just as data show growth in the American economy may be moderating. European Central Bank officials considered when they met last month removing a pledge to increase bond-buying, while ADP Research Institute data showed companies adding fewer workers to U.S. payrolls in June than than the prior month.

Read our Markets Live blog here.

Here’s what’s coming up:

  • The G-20 summit in Hamburg starts Friday. U.S. President Donald Trump is expected to hold his first meeting with Russia’s Vladimir Putin as well as meet his Chinese counterpart Xi Jinping.
  • And Friday will also see the U.S. Labor Department report official jobs figures. American employers probably added around 175,000 workers in June and wage growth probably strengthened, consistent with a solid labor market, economists project.

These are the main moves in markets:

Stocks

  • The S&P 500 declined 0.9 percent to 2,409.75 as of 4 p.m. in New York, slumping below the average price for the past 50 days of 2,413.54.
  • Phone stocks sank 2.3 percent in the steepest drop since January, while real estate shares lost 1.9 percent. Both have high dividend yields and lose favor when Treasury rates rise.
  • The Nasdaq 100 Index lost 0.9 percent, pushing its loss since June 8 to 4.9 percent.
  • The Stoxx Europe 600 Index fell 0.7 percent.
  • Emerging-market shares slipped 0.4 percent. 

Currencies

  • The Bloomberg Dollar Spot Index weakened 0.3 percent.
  • The euro advanced 0.6 percent to $1.1424 and the British pound strengthened 0.3 percent to $1.2967.

Bonds

  • The yield on 10-year Treasuries rose four basis points to 2.37 percent, after falling three basis points Wednesday. The rate is higher by 23 basis points since June 26.
  • Thirty-year yields surged as much as seven basis points Thursday to 2.92 percent, breaching both 50- and 200-day moving averages.
  • German 10-year yields climbed to their highest level in 18 months in a sign that a hawkish shift by central bankers is penetrating the market
  • The bund rate gained nine basis point to 0.56 percent. French 10-year yields climbed 10 basis points and those on gilts added six.

Commodities

  • West Texas Intermediate crude futures added 39 cents to settle at $45.52 a barrel. Rising U.S. production dampened the enthusiasm over declining crude and gasoline stockpiles.
  • Crude has held below $50 a barrel for six weeks.
  • Gold lost 0.2 percent to $1,224.99 an ounce, snapping two days of gains.
  • Spring-wheat prices plunged the most in six years and winter grades fell in active trading as investors weighed ample U.S. inventories against declining crop conditions.

— With assistance by Jessica Summers, Sydney Maki, Stephen Spratt, and Liz McCormick

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