Markets wrap: Stocks fall amid growth anxiety; yields decline
U.S. stocks declined and Treasury yields turned lower again as Federal Reserve Chair Jerome Powells persistent dovishness raises concern about the sustainability of the economic recovery.
Energy, consumer discretionary and technology shares weighed on the benchmark S&P 500. Growth favorites that led the recent rally such as Amazon.com and Google parent Alphabet dropped from recent all-time highs, sending the Nasdaq 100 lower. Biogen slumped as its Alzheimer's drug faces resistance from some health plans. Oil declined amid a stronger dollar and after OPEC+ signaled it may revive output soon.
Powell reiterated that it was still too soon to scale back monetary support such as asset purchases even though inflation has risen faster than expected. Earlier, a report showed China's second-quarter growth slowed largely in line with expectations even as a pickup in consumer spending suggested a more balanced recovery.
"It's possible that we've reached peak growth, but that doesn't necessarily mean the cycle is rolling over," Giorgio Caputo, senior fund manager at J O Hambro Capital Management. "When you factor in those peak growth concerns, as well as what's been going on with the delta variant and the way interest rates have been declining, it does seem like we're having a little bit of a growth scare."
The yield on the benchmark 10-year note fell for a second day after briefly climbing earlier in the session during Powell's testimony before a Senate banking panel.
"They're not seriously considering tapering yet and the language they use is persistently dovish," said Anna Han, an equity strategist at Wells Fargo Securities.
The Fed's potential timeline for tapering $120 billion in monthly bond purchases, and the spread of the delta Covid-19 variant, are among key variables bothering investors with global stocks near all-time highs. Another concern is the possibility that recoveries in economic growth and corporate earnings are peaking.
"The earliest we think they will make any decisions on any framework around tapering will be at the Jackson Hole Symposium in late August," said Jason England, global bonds portfolio manager at Janus Henderson Investor. "Inflation has run higher and more persistent than forecasts, however full employment is still a long way from pre-Covid levels so until they make substantial further progress on the jobs front, the Fed will continue to be patient on removing any accommodation."
Europe's Stoxx 600 gauge dropped for a second day, dragged down by energy shares.
The Bloomberg Dollar Spot Index erased losses and rose for the third time in four days. West Texas Intermediate crude futures fell on expanding U.S. fuel inventories and a potential OPEC+ agreement to increase supply.
Here are some events to watch this week:
- Bank of Japan interest rate decision Friday
These are some of the main moves in financial markets:
- - -
- The S&P 500 fell 0.3% as of 4:01 p.m. New York time
- The Nasdaq 100 fell 0.7%
- The Dow Jones Industrial Average rose 0.2%
- The MSCI World index fell 0.4%
- - -
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.2% to $1.1812
- The British pound fell 0.3% to $1.3823
- The Japanese yen rose 0.2% to 109.79 per dollar
- - -
- The yield on 10-year Treasuries declined five basis points to 1.30%
- Germany's 10-year yield declined one basis point to -0.33%
- Britain's 10-year yield advanced four basis points to 0.66%
- - -
- West Texas Intermediate crude fell 2.2% to $71.55 a barrel
- Gold futures rose 0.3% to $1,829.70 an ounce
