Small Caps Lead U.S. Stock Losses, Treasuries Rise: Markets Wrap

Updated on
  • Trump due to name next Fed chief as Russia probe intensifies
  • Russell 2000 falls most since August on tax cut questions

Grisanti Says Growth Stock Crushing Value Stocks

U.S. stocks fell, with small caps bearing the brunt of selling, and Treasuries advanced as markets struck a tone of caution at the start of a week stuffed with catalysts. The euro gained.

The Russell 2000 Index sank the most since August and the S&P 500 Index retreated from a record amid reports that proposed cuts to corporate taxes would occur in phases over several years. Markets generally shrugged off the first charges from Robert Mueller’s investigation. Apple Inc. rose on signs of strong demand for its latest phone, buoying the Nasdaq 100 Index. The company headlines another week of major earnings, with its report due Thursday.

Ten-year Treasury yields fell below 2.4 percent, with President Donald Trump’s choice to lead the Federal Reserve due any day. The dollar slumped versus the euro, with the Fed, Bank of England and Bank of Japan slated to meet this week. In Europe, equities nudged higher, with markets showing little sign of distress as the Spanish government took control of the Catalan government. The British pound strengthened ahead of the BOE rate decision Thursday.

he federal investigation into whether President Donald Trump’s campaign colluded with Russia took a major turn Monday as authorities charged three people, and could pose a danger to the White House at a time that Trump is working to push his tax plan through Congress. The phase-in plan for corporate tax cuts has been considered, but may not yet be final, said a member of the House Ways and Means Committee, who asked not to be named because the discussions are private.

“Smaller companies are more affected by those taxes than the larger companies and so they’re going to be the ones that would benefit the most,” Don Riley, Chief Investment Officer at Pennsylvania-based Wiley Group, said by phone. “That’s why you see they tend to react more over the whole tax thing.”

Elsewhere, equity benchmarks fluctuated in Japan and Chinese shares fell, with the Shanghai Composite Index tumbling the most in more than two months as the nation’s bond slump deepened amid mounting deleveraging concerns. And profit reports due this week from some of the world’s largest companies -- including Apple Inc. -- may show if there’s enough juice in the earnings season to propel a leg higher for global shares.

Terminal users can read more in our Markets Live blog.

Here are some key upcoming events this week:

  • Trump has said he’ll reveal his choice to lead the Fed by Friday.
  • The U.S. central bank’s next rate decision is on Wednesday, with economists expecting policy makers to hold rates for now and to increase them at the December meeting.
  • The U.S. October payroll report comes out Friday. On Monday, personal income and spending data comes out, which features the Fed’s preferred inflation gauge.
  • Trump starts an 11-day trip to Asia, his first as president, on Friday. Trade and security issues — particularly North Korea — will probably be in focus.
  • A probable BOE rate hike on Thursday will be the first in a decade.
  • Euro-area GDP growth is seen slowing, while GDP reports from France and Spain and national CPI prints from the big four euro-zone economies are also among data piling up this week.
  • The slew of earnings releases will culminate with Apple Inc. results.

And these are the main moves in markets:

Stocks

  • The Russell 2000 fell 1.2 percent as of 4 p.m. in New York, the most since Aug. 17.
  • The S&P 500 lost 0.3 percent and the Dow Jones Industrial Average fell the same amount. The Nasdaq 100 Index rose 0.2 percent.
  • The Stoxx Europe 600 Index rose 0.1 percent, the highest in more than five months.
  • Spain’s IBEX Index gained 2.4 percent to the highest since August.

Currencies

  • The Bloomberg Dollar Spot Index decreased 0.3 percent. 
  • The euro increased 0.4 percent to $1.1657.
  • The British pound gained 0.7 percent to $1.3128.

Bonds

  • The yield on 10-year Treasuries decreased four basis points to 2.37 percent.
  • Germany’s 10-year yield fell two basis points to 0.37 percent.
  • Spain’s 10-year yield dropped nine basis points to 1.49 percent.

Commodities

  • West Texas Intermediate crude climbed 0.5 percent to ed at $54.15 a barrel, the highest in eight months. 
  • Brent extended its two-year high as OPEC and Russia signaled they’ll prolong supply cuts. The global benchmark rose 0.8 percent to settle at $60.90 a barrel.
  • Gold added 0.14 percent to $1,273.60 an ounce.

— With assistance by Adam Haigh

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