Stocks Rise as Political Tension Cools, Bonds Slip: Markets Wrap

  • Dow adds almost 200 points in biggest advance since April
  • Bridgewater’s Dalio reducing risk on U.S. government concerns

Dennis DeBusschere, Evercore ISI's head of portfolio strategy, discusses the potential impact of Fed policy on markets with Bloomberg's Vonnie Quinn on 'Bloomberg Markets.' (Source: Bloomberg)

U.S. stocks rose the most in a week, while Treasuries declined and the dollar gained on growing speculation the Trump administration is gaining momentum in its efforts to reform the tax code. Industrial metals rallied.

The S&P 500 Index jumped 1 percent and the Dow Jones Industrial Average added almost 200 points amid reports the Trump team and lawmakers may be making progress toward pro-business reforms. Emerging-market and European equities also advanced. The risk-on tone lifted the dollar and weighed on havens from Treasuries to gold. Crude gained ahead of a U.S. government report that’s forecast to show stockpiles fell.

Investors seem to be getting over some of the sensitivity that characterized the past week following political turmoil in Washington, terrorist attacks in Europe and ongoing tension between the U.S. and North Korea. Nonetheless, Ray Dalio, the billionaire founder of Bridgewater Associates Inc., the world’s largest hedge fund, said he’s “tactically reducing” risk because he’s concerned about growing internal and external conflict “leading to impaired government efficiency” in the U.S., according to a LinkedIn post Monday.

With little top-tier economic data out this week, markets are set to focus on the annual conference of global central bankers hosted by the Kansas City Federal Reserve Bank in Jackson Hole, Wyoming. It starts on Thursday.

“No one has a lot of interest in being very negative in the market right here, knowing that there’s this whatever-it-takes backdrop where central bankers globally just have zero interest in seeing financial conditions tighten too much,” Dennis DeBusschere, head of portfolio strategy at Evercore ISI, said Tuesday in an interview on Bloomberg Television.

Terminal subscribers can read more on our Markets Live blog.

Among other key events looming this week:

  • Amazon.com Inc.’s bid for Whole Foods Market Inc. faces a shareholder vote on Wednesday.
  • Combined sales of new (data Wednesday) and previously owned (Thursday) U.S. homes probably edged up in July from the prior month, indicating a still robust real estate market held in check by rising property prices, economists forecast.
  • A verdict in the graft trial of Samsung Group heir Jay Y. Lee is due Friday.
  • Kazakhstan and Tunisia set monetary policy.

Here are the main moves in markets:

Stocks

  • The S&P 500 rose 1 percent to 2,452.51 as of 4 p.m. in New York, the biggest advance since Aug. 14.
  • The Nasdaq Composite Index added 1.4 percent to the highest since June.
  • The Russell 2000 Index climbed 1.1 percent and the Dow rose 196 points, the most since April.
  • Brazil’s Ibovespa surged to the highest since 2011 after an unexpected government proposal to privatize a utility lifted demand for state-run companies.
  • The Stoxx Europe 600 Index gained 0.8 percent.
  • Germany’s DAX Index rose 1.4 percent, the most since July.

Currencies

  • The Bloomberg Dollar Spot Index rose 0.4 percent.
  • The Japanese yen dipped 0.6 percent to 109.58 per dollar.
  • The euro sank 0.5 percent to $1.1751.

Bonds

  • The yield on 10-year Treasuries gained three basis points to 2.21 percent.
  • Blue-chip companies have sold more than $1 trillion of bonds in 2017, passing that milestone for the sixth straight year.
  • Britain’s 10-year yield gained two basis points to 1.087 percent.

Commodities

  • West Texas Intermediate crude rose 0.6 percent to end at $47.64 a barrel.
  • Gold futures fell 0.4 percent to settle at $1,291 an ounce.

— With assistance by Richard Richtmyer, and Lu Wang

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