U.S. Stocks Decline, Treasury Yields Resume Climb: Markets Wrap

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(Bloomberg) — U.S. stocks fell while bond yields pushed higher as concern grows across markets that rising borrowing costs could sap a rally that’s driven equity values to historic highs.

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The tech-heavy Nasdaq 100 slumped 1.6% and the benchmark S&P 500 declined for a third day after a report showed initial jobless claims rose more than expected. Walmart Inc. dropped after saying it will increase spending on worker salaries and automation. In Europe, banks led losses in the Stoxx 600 Index.

“If I had a dollar for every person that told me that low rates can substantiate higher multiples even though rates were low because earnings and the economy were depressed,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “This rise in rates will certainly test the mettle and staying power of the bulls.”

Yields on 10-year Treasuries climbed to 1.31%, retracing the highest levels in a year reached earlier this week. Technology companies that derive much of their cash flows from future earnings are especially vulnerable to inflation pressures.

© Bloomberg Higher U.S. Real Yields May Cause Trouble

“The market is starting to get a little wary of this ‘bad news is good news’ scenario,” said Matt Benkendorf, chief investment officer of Vontobel Quality Growth. “Now you’ve seen a bit of a mixed picture, which scrambles the monetary policy visibility.”

In currency markets, the pound touched the strongest level versus the euro since March amid continued optimism over the nation’s vaccine rollout. The dollar fluctuated against Group of 10 peers. Bitcoin retreated, paring its weekly gain to 5%.

Commodities were broadly higher, with Brent futures trading near $65 a barrel. Copper in London hit a fresh 8-year high as China’s traders returned from holiday with metals markets in a bullish mood.

Meanwhile, the global oil market is grappling with a crisis caused by freezing temperatures in the U.S. More than 4 million barrels a day of output — almost 40% of the nation’s crude production — is now offline, according to traders and executives.

Stocks in Asia dropped overnight, with the Hang Seng Index down 1.6% and Japan’s Topix index 1% lower.

These are some of the main moves in markets:

Stocks

The S&P 500 Index decreased 1% to 3,890.20 as of 10:29 a.m. New York time, the lowest in almost two weeks on the largest dip in almost three weeks.
The Dow Jones Industrial Average decreased 0.9% to 31,326.74, reaching the lowest in almost two weeks on the first retreat in a week and the biggest dip in almost three weeks.
The Nasdaq Composite Index decreased 1.7% to 13,733.34, the lowest in more than two weeks on the largest dip in almost three weeks.
The Stoxx Europe 600 Index decreased 0.9% to 412.16, the lowest in a week on the biggest dip in almost three weeks.
The MSCI All-Country World Index decreased 1% to 675.62, the lowest in more than a week on the largest dip in almost three weeks.

Currencies

The Bloomberg Dollar Spot Index was little changed at 1,129.70, the highest in more than a week.
The euro gained 0.3% to $1.2069, the largest advance in more than a week.
The Japanese yen was little changed at 105.82 per dollar.
The British pound jumped 0.6% to $1.3935, the strongest in almost three years on the largest climb in four weeks.

Bonds

The yield on 10-year Treasuries gained three basis points to 1.30%.
Germany’s 10-year yield rose four basis points to -0.33%, the highest in more than eight months.
Britain’s 10-year yield increased seven basis points to 0.638%, the highest in 11 months on the biggest climb in two weeks.

Commodities

West Texas Intermediate crude sank 0.8% to $60.66 a barrel, the first retreat in a week and the largest decrease in three weeks.
Gold depreciated 0.3% to $1,771.60 an ounce, reaching the weakest in almost eight months on its sixth consecutive decline.
Copper rose 1.7% to $3.89 a pound, the highest on record with the largest rise in almost two weeks.

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