markets

Stocks Tumble, Bonds No Haven as Selloff Worsens: Markets Wrap

Updated on
  • Yield on U.S. 10-year note touches highest since April 2014
  • Dollar fluctuates before Trump’s State of Union address

VIX at Highest Level Since August as Stocks Tumble

The Dow Jones Industrial Average tumbled 362 points, helping to send U.S. stocks to the biggest two-day decline since May, while yields on benchmark government bonds touched April 2014 highs as caution crept into markets after one of the best starts to a year in recent history.

Screens flashed red across most asset classes, with investors on edge ahead of a slew of earnings, a U.S. rate decision, the president’s address to Congress and major economic data. All major U.S. equity indexes sank a second day, with investors pocketing profits from a four-week rally that greeted 2018. The 10-year Treasury yield pushed above 2.73 percent, the highest since April 2014. Commodities retreated, led by crude and industrial metals. Gold turned lower, while the dollar fluctuated.

Equities took a series of blows that added to the selling. MetLife Inc. headlined a series of disappointing earnings, dampening enthusiasm over tax cuts. News that Amazon.com, JPMorgan Chase and Berkshire Hathaway plan a joint unit that may redefine health-care jolted that sector to the steepest drop in more than a year. Apple Inc., the world’s largest company by market value, sank to a three-month low amid reports of a government inquiry and as concern mounts that its latest iPhone isn’t selling briskly. Energy producers slumped with the price of crude.

“We’ve just had such a huge move in one month, it’s scared people. We had huge flows into equities at the beginning of this year," said Carmel Wellso, director of research at Janus Henderson. “Some people might be saying ’Wow, I just made 10 percent, that’s what I wanted to make for this whole year. Maybe I’ll take some money off the table.’"

Investors are weighing whether stronger corporate earnings, a pick-up in economic growth and optimism over U.S. tax cuts can continue driving up prices in markets that recently touched their highest on record; Goldman Sachs Group Inc. predicts a correction is on the horizon, but says any such pullback would be a buying opportunity.

The anxiety spread to Asia and Europe, with euro-zone stocks falling the most since November and Japan’s Topix wiping out gains for the year. Emerging-market stocks tumbled 1.7 percent, the most in two months. Gold futures lost 0.3 percent and even Bitcoin joined the selloff, sinking as much as 12 percent to fall below $10,000 before recovering from the lows of the day.

Terminal users can read more in our markets blog.

Here are some important things to watch out for this week:

  • Fed policy makers gather for Chair Janet Yellen’s final meeting on interest rates Wednesday before her term ends.
  • President Trump delivers his first State of the Union address.
  • Tech giants Microsoft Corp., Facebook Inc., SAP SE, Alibaba Group Holding Ltd., Apple Inc., Alphabet Inc. and Amazon.com Inc. will announce earnings. Large-caps Exxon Mobil Corp., Merck & Co. Inc., Roche Holding AG, Daimler AG, Deutsche Bank AG and Boeing Co. also report.
  • U.S. employers probably added more jobs in January than a month earlier, economists forecast before the Friday report.
  • Bank of England Governor Mark Carney will speak before the U.K. Parliament’s Economic Affairs Committee in London Tuesday.
  • Gauges of Chinese manufacturing and services industries are due Wednesday.
  • On Wednesday, the core euro-zone inflation report may show an uptick from a year ago to 1 percent this month.

And these are the main moves in markets:

Stocks

  • The S&P 500 Index sank 1.1 percent, bringing the two-day decline in the benchmark index to 1.89 percent, the most since May 17. The Dow Jones Industrial Average dropped 1.4 percent and the Nasdaq Composite Index was down 0.9 percent as of 4:01 p.m. New York time.
  • The Stoxx Europe 600 Index dipped 0.9 percent, the largest decline in at least six weeks.
  • The MSCI Asia Pacific Index decreased 1.3 percent on the largest slide in almost eight weeks.
  • The U.K.’s FTSE 100 Index dipped 1.1 percent.

Currencies

  • The Bloomberg Dollar Spot Index was little changed.
  • The euro rose 0.1 percent to $1.2396, but fell back after reaching the highest level in more than three years.
  • The British pound increased 0.5 percent to $1.4141.
  • The Japanese yen gained 0.1 percent to 108.84 per dollar.

Bonds

  • The yield on 10-year Treasuries increased three basis points to 2.73 percent, the highest in almost four years.
  • Germany’s 10-year yield fell one basis point to 0.68 percent and the largest drop in two weeks.
  • Britain’s 10-year yield rose one basis point to 1.46 percent.

Commodities

  • West Texas Intermediate crude fell 1.2 percent to $64.37 a barrel.
  • Gold fell 0.3 percent to $1,336.79 an ounce.
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