Stocks pull back as bond yields rise

May 16, 2018

By IFCMarkets

Dow snaps eight-session win streak

US stocks retreated Tuesday as 10-year Treasury yield breached above the 3% threshold. The S&P 500 ended 0.7% lower at 2711.45. Ten of 11 main sectors ended in negative territory. Dow Jones industrial average lost 0.8% to 24706.41 after eight-session win streak. The Nasdaq composite index fell 0.8% to 7351.63. The dollar strengthening accelerated: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.6% to 93.233 and is down currently. Stock indices futures indicate higher openings today.

Stocks fell as Treasury yields rose on expectations the Federal Reserve’s monetary tightening and rising budget deficit will push interest rates higher, negatively affecting corporations’ earnings outlook as borrowing costs rise. Positive economic data failed to prevent the market pullback: retail sales rose for a second straight month in April, and the Empire State manufacturing index rose in May, both indicating accelerating economy.

European stocks recover on positive data

European stocks recovered Tuesday in volatile trading helped by positive data and earnings reports. The British Poundjoined euro’s accelerated slide against the dollar with both currencies gaining currently. The Stoxx Europe 600 added 0.1%. The German DAX 30 lost 0.1% to 12970.04. France’s CAC 40 rose 0.2% and UK’s FTSE 100 gained 0.2% to 7722.98. Markets opened mixed today.

The preliminary reading of 0.4% GDP growth in the euro-zone was confirmed, in line with expectations. Bigger than expected slowdown of German economy weighed on DAX: Q1 GDP slowed to 1.2% from 2.5% in the fourth quarter of last year.

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Asian indices down

Asian stock indices are mostly lower today after weak Japanese data and North Korea said it would reconsider a summit with President Trump next month if the US demands denuclearization. Nikkei lost 0.4% to 22717.23 as Q1 GDP shrank 0.6% over year and yen rose against the dollar. Chinese stocks are mixed: the Shanghai Composite Index is down 0.7% and Hong Kong’s Hang Seng Index is flat. Australia’s All Ordinaries Index is up 0.2% despite Australian dollar’s climb against the greenback.


Brent slips

Brent futures prices are lower today ahead of US inventory report as traders expect US inventories rose last week. The American Petroleum Institute late Tuesday report indicated US crude inventories rose unexpectedly by 4.9 million barrels last week. Prices ended higher yesterday on rising Middle East tensions: July Brent gained 0.3% to $78.43 a barrel Tuesday. Today at 16:30 CET the Energy Information Administration will release US Crude Oil Inventories.

Market Analysis provided by IFCMarkets

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