Stocks, bond yields drop as recovery risk lingers - BNN

U.S. stocks fell and Treasuries gained as investors mulled whether the levels of stimulus being provided is enough amid a gradual economic recovery.

The benchmark S&P 500 dropped for a second day, though it found some support after bouncing off its 50-day moving average. Technology shares were the biggest decliners, with Apple Inc. and Microsoft Corp. weighing on the Nasdaq Composite.

Investors are snapping up long-term Treasuries, capturing a brief spike higher in yields following the Federal Reserve’s policy decision Wednesday. Although Fed Chair Jerome Powell said the central bank will maintain easy policy after easing its inflation policy, he didn’t provide clarity as to just how high it can go and for how long. That, along with the lack of fresh details on the Fed’s plans for its bond-buying program, sparked long-end demand.

“It remains to be seen how the long-term projection of near zero interest rates and more free-flying inflation will actually play out for the economy,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial Corp. “And the somewhat dour tone from the Fed could weigh on investors.”

The number of Americans applying for jobless benefits resumed its decline, while continuing claims fell by almost 1 million in the week ended Sept. 5.

All eyes remain on central bankers and their role in propping up economies still reeling from the coronavirus shock. Bank of England policymakers said they were exploring negative rates to counter ongoing risks to the labor market after voting unanimously to maintain their key interest rate at 0.1 per cent, causing the pound to slide to an intraday low. Earlier the Bank of Japan kept its asset-purchases and bond-yield targets in place.

Recent flare-ups of the virus and a fading post-pandemic recovery have renewed calls for more fiscal support as well. Fed officials have stressed in recent weeks that the U.S. recovery is highly dependent on the nation’s ability to better contain infections, and that further fiscal stimulus is likely needed to support jobs and incomes.

“Consumer sentiment data and the employment picture still reflect a fragile economic recovery,” said Matt Miskin, co-chief investment strategist at John Hancock Investments. “Powell did not bring up the need for further fiscal support multiple times yesterday just for the sake of it. Monetary policy has its limits, the lack of fiscal policy support leaves significant risks to this recovery.”

Meanwhile, the White House strongly signaled Wednesday that it is willing to increase its offer in talks with Democrats, and that Senate Republicans should go along in order to seal a stimulus deal in the next week to 10 days.

Elsewhere, crude oil traded above US$40 a barrel. Gold declined.

These are some of the main moves in markets:

Stocks

• The S&P 500 Index fell one per cent to 3,352.09 as of 11:53 a.m. New York time, the largest fall in a week.
• The Dow Jones Industrial Average declined 0.4 per cent to 27,931.38, the first retreat in a week.
• The Nasdaq Composite Index fell 1.7 per cent to 10,862.23, the largest fall in a week.
• The Nasdaq 100 Index fell 1.9 per cent to 11,029.44, the lowest in more than five weeks on the biggest fall in a week.
• The Stoxx Europe 600 Index fell 0.5 per cent to 371.23, the first retreat in a week.

Currencies

• The Bloomberg Dollar Spot Index declined 0.1 per cent to 1,163.81, reaching the lowest in more than two weeks on its fifth straight decline.
• The British pound declined 0.1 per cent to US$1.2948, the largest fall in a week.
• The euro rose 0.1 per cent to US$1.1827.
• The Japanese yen appreciated 0.2 per cent to 104.76 per dollar, the strongest in seven weeks.

Bonds

• The yield on two-year Treasuries declined one basis point to 0.13 per cent.
• The yield on 10-year Treasuries declined two basis points to 0.68 per cent, the largest fall in a week.
• Germany’s 10-year yield fell one basis point to -0.49 per cent, the lowest in more than a week.
• Britain’s 10-year yield dipped three basis points to 0.183 per cent.

Commodities

• West Texas Intermediate crude rose 1.8 per cent to US$40.87 a barrel, the highest in two weeks.
• Gold weakened 0.7 per cent to US$1,944.97 an ounce, the largest decrease in more than two weeks.

--With assistance from Kamaron Leach, Liz Capo McCormick and Lu Wang.

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2020-09-17 17:14:54Z
CBMiVmh0dHBzOi8vd3d3LmJubmJsb29tYmVyZy5jYS9zdG9ja3MtYm9uZC15aWVsZHMtZHJvcC1hcy1yZWNvdmVyeS1yaXNrLWxpbmdlcnMtMS4xNDk1MTQ40gEA