Stocks slump, Treasurys surge amid economic gloom
Stocks slumped while Treasurys surged as bleak retail, manufacturing and homebuilding data from the world's largest economy added to concern over a severe global recession.
The S&P 500 Index sank from a one-month high, with all of its major groups dropping. Financial shares slid as Goldman Sachs Group's investment portfolio took a hit from the coronavirus pandemic, while Bank of America and Citigroup followed rivals in setting aside billions for loan losses. Oil plunged to the lowest in two decades amid a record collapse in U.S. fuel demand. Treasurys surged with the dollar.
Both earnings and economic data highlight the brutal impact of the economic stoppage designed to combat the virus outbreak. U.S. retail sales and factory output posted historic declines in March, and surveys in April looked even worse. Manufacturing in New York state and sentiment among American home builders plunged by previously unthinkable amounts.
"The market mood has soured in the blink of an eye," Mark McCormick, global head of currency strategy at Toronto Dominion Bank, said in a note. "It's not surprising to us that the price action has started to wake up to the new realities of the environment: Unprecedented poor data and earnings guidance, a wobbly path from lockdowns to exit strategies and overpricing of the recent news cycle."
U.S. stocks have gone through their biggest bout of weakness relative to Treasury securities in decades, according to a barometer cited by Talley Leger, a senior investment strategist at Invesco US. The indicator is the ratio between the S&P 500 and the reciprocal of the 10-year Treasury's yield, which he presented in an April report on market gauges. The ratio started this month by closing at its lowest level since 1983 after tumbling 85% from a high in October 2018. A rebound is needed for stocks to recover, Leger wrote.
In focus this week:
- BlackRock Inc.'s earnings are set for Thursday.
- China releases GDP, industrial production and retail sales and jobless figures Friday.
These are the main moves in markets:
Stocks
- The S&P 500 sank 2.2% as of 4 p.m. EDT.
- The Stoxx Europe 600 Index slid 3.2%.
- The MSCI Asia Pacific Index dipped 0.4%.
Currencies
- The Bloomberg Dollar Spot Index jumped 1%.
- The euro dipped 0.6% to $1.0912.
- The Japanese yen weakened 0.3% to 107.56 per dollar.
Bonds
- The yield on 10-year Treasurys decreased 12 basis points to 0.63%.
- Germany's 10-year yield decreased nine basis points to -0.47%.
- Britain's 10-year yield fell four basis points to 0.302%.
Commodities
- The Bloomberg Commodity Index sank 1.7%.
- West Texas Intermediate crude fell to $19.87 a barrel.
