Stocks Rally Falters Late Amid Political Risks: Markets Wrap

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  • Tech strength drives equities higher, metals and oil gain
  • China said to weigh yuan depreciation; Hang Seng up over 1%

Pelosky Global Advisors Sees a 'Real Opportunity in Small Caps

The rally in U.S. stocks faltered in the final hour of trading, with a report that federal agents raided the offices of President Donald Trump’s lawyer adding to the swoon. Equities finished higher on the strength of gains in technology shares that bore the brunt of last week’s tariff-induced decline.

The S&P 500 Index pared an advance that had approached 2 percent to finish up 0.3 percent by the end of the session. The final leg down came after the New York Times reported that agents from the Federal Bureau of Investigation raided Michael Cohen’s office.

“It’s the culmination of negative events with potentially no solution on the horizon,” said Stephen Carl, head trader at Williams Capital Group. He cited news on “trade tariffs, Syria and the FBI raiding the offices of Michael Cohen, Trump’s personal lawyer” as all contributing to negative sentiment.

Fears that China and the U.S. would escalate a trade war took a back seat Monday after equities rose in Asia and Europe, though shares in sectors that would be hit hardest by a trade spat underperformed. Strength in chipmakers pushed the Nasdaq 100 Index up more than 2.5 percent, but that rally faded to 0.6 percent by the close.

The late selling damped what looked to be a stellar rebound from last week, when trade angst rattled global financial markets. Instead, political risk related to Special Counsel Robert Mueller’s investigation of Russian meddling in the U.S. election resurfaced. Tech still outperformed as investors began to shift focus to the earnings season that starts later in the week.

That’s not to say the trade issue has vanished. China was said to be reviewing ways to use its currency as a weapon as President Xi Jinping is set to deliver a speech Tuesday that may include a strong warning about the consequences of a prolonged dispute. Still, currency moves, including a recovery in emerging markets, bore out the sense that calm may prevail. Trump said his administration will “probably” come to an agreement on the dispute with China.

“What the market will now want to hopefully see is some form of negotiation starting between the Chinese and the Americans,” James Barty, Bank of America Corp.’s head of global cross-asset and European equity strategy, said on Bloomberg TV. “It’s not in anybody’s interest to go down to a full-blown trade war.”

Jay Pelosky, founder at Pelosky Global Advisors, and Andres Garcia Amaya, founder at Zoe Financial, on Bloomberg TV.

Markets: The Open." (Source: Bloomberg)

Meanwhile, in Russia the ruble plunged and the Moex Russia Index of stocks tumbled the most in four years after the U.S. sanctioned some prominent Kremlin-connected billionaires and their companies. Bitcoin briefly traded above $7,000 before sliding back.

European stocks pared their gains, after earlier hitting a three-week high, while a measure of global shares advanced. Safe-haven assets showed little reaction to a missile attack on a Syrian airbase that Russia blamed on Israel.

Terminal users can read our markets live blog here.

Here’s what is coming up this week:

  • Bank of Japan Governor Haruhiko Kuroda speaks at the start of his second term.
  • China’s Xi gives a keynote address at Boao Forum Tuesday.
  • Facebook Inc. Chief Executive Officer Mark Zuckerberg testifies at two Congressional hearings Tuesday and Wednesday.
  • U.S. CPI data and FOMC minutes due Wednesday.
  • JPMorgan Chase & Co. and Citigroup Inc. report first-quarter earnings Friday.

These are the main moves in markets:

Stocks

  • The S&P 500 rose 0.3 percent to 2,613.16 as of 4 p.m. in New York.
  • The Nasdaq 100 added 0.6 percent and the Russell 2000 Index finished higher by 0.1 percent.
  • The Stoxx Europe 600 Index advanced 0.1 percent.
  • The MSCI All-Country World Index climbed 1 percent.
  • Hong Kong’s Hang Seng Index gained 1.3 percent, the largest rise in a month.

Currencies

  • The Bloomberg dollar spot index fell 0.2 percent
  • The euro gained 0.3 percent to $1.2321.
  • The Japanese yen rose 0.2 percent to 106.76 per dollar.
  • The British pound advanced 0.3 percent to $1.4132.
  • The Russian ruble declined 3.9 percent to 60.3579 per dollar, the biggest decrease since June 2015.

Bonds

  • The yield on 10-year Treasuries added one basis point to 2.7753 percent.
  • Britain’s 10-year yield increased one basis point to 1.407 percent.
  • Germany’s 10-year yield climbed one basis point to 0.504 percent.

Commodities

  • West Texas Intermediate crude surged 2.1 percent to $63.34 a barrel, the biggest advance in more than two weeks.
  • Gold rose 0.3 percent to $1,337.21 an ounce.
  • LME aluminum soared 6.6 percent, its biggest bounce since January 1992.
  • The Bloomberg Commodity Index gained 1.2 percent, its largest gain in almost two months.

— With assistance by Joanna Ossinger, Luke Kawa, and Andrew Dunn

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