Stocks fall, bonds gain as recovery risk lingers - BNN

U.S. stocks fell for a second day and Treasuries gained as signs of a gradual economic recovery added to investor anxiety over the level of stimulus.

The S&P 500 opened lower, weighed down by the technology, consumer discretionary and energy sectors. The tech heavy Nasdaq Composite fell more. Global equities were already in retreat after Federal Reserve Chair Jerome Powell highlighted risks to the recovery in the central bank’s policy decision Wednesday, the last before the U.S. presidential election on Nov. 3.

“The Fed’s enchantment of easy money remains -- but markets are a feeling a bit lethargic,” said Yousef Abbasi, global market strategist at StoneX. “Is this just a bit of an FOMC hangover or does it signal the first signs of a loss of confidence in Fed policy? It is likely too early for the latter -- but that is a scenario that will need to be closely monitored into year-end.”

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.

Tech stocks slid as much as 2% in Europe after giants Apple Inc. and Facebook Inc. tumbled late Wednesday. Automakers slumped after data showed European car sales plunged by nearly a fifth in August. The dollar edged higher.

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%, 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, WTI crude oil slipped to around $40 a barrel. Gold declined.

These are some of the main moves in markets:

Stocks

The S&P 500 Index decreased 1.6% to 3,333.36 as of 9:33 a.m. New York time, the lowest in more than a week.

The Dow Jones Industrial Average fell 1.3% to 27,667.31, the first retreat in a week.

The Nasdaq Composite Index declined 2% to 10,834.97, the lowest in five weeks on the largest fall in more than a week.

The Nasdaq 100 Index fell 2.2% to 11,012.04, the lowest in five weeks on the biggest fall in more than a week.

The Stoxx Europe 600 Index fell 0.9% to 369.75, the first retreat in a week and the largest fall in more than a week.

Currencies

The Bloomberg Dollar Spot Index advanced 0.1% to 1,165.93, the first advance in a week.

The euro fell 0.2% to $1.1794, the weakest in more than a week.

The Japanese yen appreciated 0.3% to 104.61 per dollar, the strongest in about six months.

Bonds

The yield on 10-year Treasuries declined four basis points to 0.66%, the lowest in almost two weeks on the largest fall in more than a week.

The yield on 30-year Treasuries declined five basis points to 1.41%, the biggest fall in more than a week.

Germany’s 10-year yield declined two basis points to -0.50%, the lowest in almost four weeks.

Commodities

West Texas Intermediate crude fell 0.8% to $39.81 a barrel.

Gold depreciated 1.1% to $1,936.55 an ounce, the weakest in more than a week on the biggest tumble in two weeks.

Copper declined 0.6% to $3.04 a pound.

--With assistance from Kamaron Leach and Claire Ballentine.

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2020-09-17 13:47:10Z
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