Stocks snap rally; yields drop to February lows
U.S. stocks fell, snapping a streak of seven consecutive closing record highs, as a plunge in Treasury yields to the lowest since February weighed on banks and small caps. A gauge of the dollar strengthened and crude oil dropped from a six-year high.
The benchmark S&P 500 was led lower by the energy and financial sectors. Amazon.com pushed the Nasdaq 100 to another all-time high. Ride-hailing firm Didi Global Inc. plunged after a Chinese regulator ordered the removal of its platform from app stores, days after its U.S. listing. Yields dropped earlier as a gauge of service-sector activity faltered.
The benchmark 10-year yield fell as much as 7.4 basis points to just under 1.35%, the lowest level since Feb. 24. The 30-year bond's yield slid 5 basis points to 1.99%, testing its 200-day moving average and its first time below 2% since June 21. The session lows were reached shortly after the ISM Services Index for June fell more than expected from May's record high.
"People start to get nervous when the 10-year gets below 1.45%," said Sarah Hunt, a money manager at Alpine Woods. "People are worried that it signals that you're going to have an economic slowdown."
West Texas Intermediate futures for August fell as much as 3% in New York. The Bloomberg Dollar Spot Index rose, making commodities priced in the dollar less attractive to investors. Oil prices earlier surged to a six-year high after a bitter fight between Saudi Arabia and the United Arab Emirates plunged OPEC+ into crisis and blocked a supply increase. Investors are assessing the risk of the conflict escalating into a price war that could hamper the global economic recovery and add to inflationary pressures. That, in turn, may strengthen the Federal Reserve's case for tightening policy.
"There's still concerns about what happens with the Fed tapering and there's lack of traction on the fiscal stimulus side," said Keith Lerner, chief market strategist at Truist Advisory Services. "Those uncertainties are just injecting some volatility and then you throw in concerns about peak economic growth. That just feeds into the concerns about -- is the best growth behind us?"
Minutes due Wednesday from the Fed's latest meeting may provide further context on the central bank's hawkish pivot last month.
The Chinese crackdown has knocked about $42 billion off the market value of firms listed on the Nasdaq's Golden Dragon China Index, which tracks Chinese ADRs, since the government derailed the planned IPO of giant Ant Group Co. in November. Further moves included a record $2.8 billion fine on Alibaba Group Holding Ltd. after an antitrust probe found it had abused its market dominance, sparking concern about the future of the sector.
These are some of the main moves in markets:
Stocks
- The S&P 500 fell 0.2% at 4 p.m. EDT, the most since June 18
- The Nasdaq 100 rose 0.4% to a record high
- The Dow Jones industrial average fell 0.6%, more than any closing loss since June 18
- The MSCI World index fell 0.3%, more than any closing loss since June 18
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%, more than any closing gain since June 17
- The euro slipped 0.3%, more than any closing loss since June 18
- The British pound fell 0.3% to $1.3802
- The Japanese yen rose 0.3% to 110.64 per dollar
Bonds
- The yield on 10-year Treasurys declined seven basis points, more than any closing loss since June 17
- Germany's 10-year yield declined six basis points, more than any closing loss since March 1
- Britain's 10-year yield declined eight basis points, more than any closing loss in more than 15 months
Commodities
- West Texas Intermediate crude fell 1.8%, the most since June 28
- Gold futures rose 0.8%, climbing for the fourth straight day, the longest winning streak since May 20
