U.S. stocks fell the most in a month, retreating from all-time highs as crude oil slid into a bear market on concern the global supply glut will persist. China’s yuan got a small bump after MSCI Inc. added the nation’s domestic stocks to its emerging-markets index.
The S&P 500 Index lost 0.7 percent for its biggest decline since May 17 as energy producers and companies whose profits are most linked to economic growth, including makers of non-essential consumer goods and industrial producers, led declines. The dollar rose as Fed officials continued to reiterate a moderately hawkish stance on monetary policy. Treasuries rose.
The MSCI decision will add 222 China A-share stocks starting in May 2018. The index provider delayed its decision on the status of Argentina’s stocks and will consult on the possible inclusion of Saudi Arabia in the index. China’s $6.8 trillion onshore market is the world’s second largest and accounts for 9 percent of global stock value, but had been rejected for index inclusion three times by MSCI over issues including capital controls and long trading halts. Hong Kong shares retreated ahead of the decision.
Stocks in the U.S. faltered as the weakness in crude and other commodities dents arguments from American central bankers that weak inflation rates will be transitory, even as the economy shows few signs of distress and haven assets have not been in demand. The Fed raised rates last week. Stocks had barreled to fresh highs after a series of geopolitical concerns seems to have faded, though formal negotiations over Britain’s exit from the European Union began somewhat contentiously.
Still to come on the Fed speaker list: Eric Rosengren, Robert Kaplan, Jerome Powell, James Bullard and Loretta Mester.
Read our Markets Live blog here.
Here are the main moves in markets:
The S&P 500 fell 0.7 percent to 2,437.08 at 4 p.m. in New York. Energy stocks and consumer discretionary producers slumped 1.3 percent to lead the gauge lower. Industrial and phone stocks fell 1.1 percent.
The Dow Jones Industrial Average dropped 0.3 percent after it ended Monday at a record, while the Nasdaq Composite Index declined 0.8 percent.
The Stoxx Europe 600 erased a gain to end 0.7 percent lower. The U.K.’s FTSE 100 Index declined 0.7 percent.
The Bloomberg Dollar Spot Index rose 0.3 percent after advancing 0.4 percent on Monday. The measure touched the lowest level since October last week.
The British pound fell 0.8 percent to $1.2631 for a second day of losses as Bank of England Governor Mark Carney said he is still worried about the impact of Brexit on the economy.
The euro was down 0.2 percent to $1.1126.
The yen gained 0.1 percent to 111.445 per dollar. The currency retreated 0.6 percent on Monday.
The yield on 10-year Treasuries fell three basis points to 2.16 percent, after rising four basis points Monday. The yield curve flattened amid demand for longer-dated maturities.
Benchmark yields in the U.K. fell four basis points.
West Texas oil fell more than 20 percent from its highest close this year. It was down more than 2 percent Tuesday to settle at $43.23 a barrel, the lowest since August.
Gold futures slipped 0.2 percent to $1,244 an ounce, after closing Monday at the lowest in more than a month.
Copper posted its biggest loss in six weeks as the dollar strengthened.
U.S. technology shares led gains that sent benchmark equity indexes to fresh records, while hawkish comments from a Federal Reserve official boosted the dollar and Treasury yields.
The Nasdaq 100 Index jumped the most since November, as large-cap tech stocks rebounded from two weeks of declines, though not enough to recoup all of the losses that started June 9. The S&P 500 Index and Dow Jones Industrial Average ended at all-time highs. Treasuries fell after William Dudley said halting the tightening cycle now would imperil the economy. The dollar rose to the highest versus the yen since June 2, while gold slipped to a one-month low as haven demand ebbed.
In Asia, the focus is on the MSCI Inc. decision on whether to include China A shares in its global indexes; Hong Kong stocks surged in advance of Tuesday’s announcement. Oil continued to languish at about $45 per barrel as U.S. drillers continue to add rigs, blunting OPEC-led efforts to rebalance an oversupplied market.
The rebound in tech shares exemplified the risk-on mood among investors as the week began, with Apple Inc. leading a rebound in the some of the year’s highest fliers — though the tech indexes remain about 2 percent below records achieved earlier this month. Commodities continued to slump, damping inflation expectations even as the Fed insists tighter policy remains appropriate. And a cloud of uncertainty remains over both U.K. leadership and the outlook for Brexit negotiations.
“Risk assets around the world are rallying again as the ‘carry party’ resumes,” Societe Generale SA strategist Kit Juckes wrote in a client note. Fed Chair Janet Yellen “did nothing to persuade the market” to take its hawkish outlook for the path of interest rates seriously, he said.
Read our Markets Live blog here.
Here are some of the key upcoming events:
Vice-Chair Stanley Fischer speaks tomorrow, as Fed speakers dominate the week. Then the list reads: Eric Rosengren, Robert Kaplan, Jerome Powell, James Bullard and Loretta Mester.
MSCI announces whether it approved Chinese-listed stocks in its global benchmarks. The $6.8 trillion onshore market is the world’s second-largest and accounts for 9 percent of global stock value, but has been rejected for index inclusion three times by MSCI over issues including capital controls and long trading halts. MSCI’s decision is expected Tuesday after the close of U.S. markets.
Small caps in the Russell 2000 Index rose 0.8 percent. That index sits about 0.5 percent below its record set June 13.
The Stoxx Europe 600 jumped 0.9 percent after falling 0.5 percent last week.
The Bloomberg Dollar Spot Index advanced 0.4 percent. The measure added to gains after Dudley said he is confident that the economic expansion has a way to run and that wage growth is likely to quicken, though inflation is lower than the Fed would like.
The yen declined 0.7 percent to 111.595 per dollar.
The pound fell 0.4 percent to $1.2732. The euro dropped 0.4 percent to $1.1153.
The yield on 10-year Treasuries rose four basis points to 2.19 percent.
Argentina will test investor confidence by offering its first 100-year bond barely a year after finally settling a protracted legal dispute tied to a $95 billion default.
U.K. 10-year yields rose one basis point to 1.03 percent; those in Germany increased less than one basis point to 0.28 percent.
West Texas Intermediate oil slipped 1.2 percent to settle at $44.20 a barrel. Crude has fallen four weeks straight as U.S. drillers continue to add rigs, blunting OPEC-led efforts to rebalance an oversupplied market.
Gold futures slid 0.8 percent to settle at $1,246.70 an ounce, capping an eighth decline in nine sessions. The metal has fallen 4 percent since trading at a seven-month high on June 6.
The dollar all but erased losses while most U.S. stocks slipped from records after Federal Reserve Chair Janet Yellen suggested weak readings on inflation won’t persist as the central bank continued its path of tightening. Treasuries rallied on slower price acceleration.
The greenback was little changed versus the euro after weakening as much as 0.8 percent during the session. Technology stocks led declines on equity benchmarks, as Yellen reiterated the central bank’s intention of continuing to raise rates as data improve, even as inflation readings fall short of expectations. Data earlier Wednesday showing a deceleration in price gains sparked a Treasury rally that shaved as many as 11 basis points from the 10-year yield.
“Everyone is concerned about the path of interest rate increases as well as the methodology for reducing the balance sheet, and this is creating a little bit of volatility intraday,” Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, said by phone. “The volatility should creep higher in the course of the summer months as Fed moves further in adjusting the balance sheet.”
The Fed’s actions and words struck a careful balance between showing resolve to continue tightening in response to falling unemployment while acknowledging the persistence of unexpectedly low inflation this year. Policy makers agreed to raise their benchmark lending rate for the third time in six months, maintained their outlook for one more hike in 2017 and set out some details for how they intend to shrink their $4.5 trillion balance sheet this year.
Central banks in Japan, Switzerland and Britain are also scheduled to weigh in with policy decisions this week. Investors have reined in expectations for a Bank of England interest-rate increase after the election shock.
Markets largely ignored a shooting that wounded the third-highest ranked U.S. House Republican and at least four others at a congressional baseball practice in Alexandria, Virginia. The gunman later died from injuries in a shootout with police.
Read our Markets Live blog here.
Here are the major movers:
The S&P 500 fell 0.1 percent to 2,437.91 at 4 p.m. in New York, after fluctuating for most of the session.
The tech-heavy Nasdaq indexes fell 0.4 percent, while small caps lost 0.6 percent. The Dow Jones Industrial Average edged higher to a fresh record, led by gains in Home Depot Inc. and Travelers Cos.
The Stoxx Europe 600 Index erased gains to close lower by 0.3 percent.
MSCI’s emerging-market index added 0.3 percent, paring gains after the Fed decision.
The Bloomberg Dollar Spot Index fell 0.2 percent, trimming a drop that reached 0.7 percent.
The yen was 0.5 percent stronger at 109.565 per dollar.
The pound fell 0.1 percent to $1.2747 after it strengthened 0.8 percent Tuesday.
The Canadian dollar rose 0.1 percent, gaining for a fifth day. The euro added 0.1 percent to 1.1219.
The yield on 10-year Treasury notes fell eight basis points to 2.14 percent. It slipped to 2.10 earlier in the session.
The yield on U.K. gilts dropped 11 basis points to 0.93 percent after rising seven points on Tuesday.
West Texas crude futures fell 3.7 percent to settle at $44.73 a barrel, the lowest since November. The U.S. government reported gasoline and other petroleum product stockpiles swelled last month. WTI has fallen 19 percent this year from its peak of $55.24 on Jan. 3.
Spot gold fell to the lowest level in more than two weeks after the Fed’s decision. The metal fell as much as 0.7 percent to $1,257.28 an ounce. It earlier rose more than 1 percent.