The Standard & Poor’s 500 Index declined by the most since September and yields on benchmark Treasuries touched the highest levels since early 2014 as traders gear up for a hectic week of data and policy announcements. The dollar strengthened against all its major rivals.
The Dow Jones Industrial Average also declined by the most in almost five months. The euro retreated as German bonds dropped for a fourth day, while the Stoxx Europe 600 Index inched lower after the MSCI Asia Pacific Index slumped. Treasuries climbed from the lows of the day after data on personal income and spending.
"You're coming off a relatively strong period, where you've had a really sharp move in equity markets from the beginning of the year," Kevin Caron, a senior portfolio manager at Washington Crossing Advisors, said. "The forward-looking return on equities has come down marginally because of the valuation issue, and at the same time, global investors are looking at bond yields which have risen, maybe making global bonds a little more attractive. At some point you would expect to see a rotation out of one and into another."
Janet Yellen's final policy meeting as Federal Reserve chairwoman will be the main focus of investor attention in what is shaping up to be another busy week for markets finding their feet after the recent dollar selloff. There is a string of economic data due, as well as a State of the Union address from President Donald Trump and earnings releases from the world's biggest technology companies.
The US dollar advance came after it capped a seventh week of losses on Friday, while the yen weakened as the Bank of Japan downplayed Governor Haruhiko Kuroda’s comments on stronger inflation, and the British pound declined as pressure built on Prime Minister Theresa May over Brexit.
Elsewhere, US oil fell, though it’s at about its strongest level in five months relative to global benchmark Brent crude as a weaker dollar and falling stockpiles boost the American marker. Metals advanced amid optimism over global growth and the impact of the softer greenback, with zinc soaring to the highest level in more than a decade.
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Bitcoin climbed, holding its value above $11,000 even after a heist of about $500 million in a different digital token spurred calls for more cryptocurrency regulation.
Here are some important things to watch out for this week:
- Federal Reserve policy-makers gather for Chairwoman Janet Yellen's final meeting on interest rates on Wednesday before her term ends
- President Trump delivers his first State of the Union address.
- Tech giants Microsoft, Facebook, SAP, Alibaba Group Holding, Apple, Alphabet and Amazon.com will announce earnings. Large-caps McDonald's, Exxon Mobil, Merck, Roche, Daimler, Deutsche Bank and Boeing also report.
- US employers probably added more jobs in January than a month earlier, economists forecast before the Friday report.
- Bank of England Governor Mark Carney will speak before the UK parliament's economic affairs committee in London on Tuesday.
- The sixth round of North American Free Trade Agreement talks conclude in Montreal.
- Gauges of Chinese manufacturing and services industries are due on Wednesday.
- The euro area's twin obsessions — growth and inflation — are on display this week. On Tuesday, data may show the economy with a solid expansion at a 0.6 per cent quarterly rate. On Wednesday, the core euro-zone inflation report may show an uptick from a year ago to 1 per cent this month.
These are the main moves in markets:
Stocks
- The S&P 500 Index sank 0.67 per cent, while the Dow Jones Industrial Average dropped 0.67 per cent and the Nasdaq Composite Index fell 0.5 per cent as of 4:18pm New York time.
- The MSCI World Index of developed countries sank 0.5 per cent, the first retreat in more than a week and the biggest dip in more than two weeks.
- The MSCI Asia Pacific Index dipped 0.3 per cent.
- Japan's Nikkei 225 Stock Average fell less than 0.05 per cent to the lowest in more than three weeks.
- The MSCI Emerging Market Index sank 0.4 per cent, the first retreat in more than two weeks and the largest decrease in almost three weeks.
- The U.K.'s FTSE 100 Index gained 0.1 per cent.
- The Stoxx Europe 600 Index fell 0.2 per cent.
Currencies
- The Bloomberg Dollar Spot Index jumped 0.3 per cent, after posting the biggest increase in more than six weeks.
- The euro fell 0.4 per cent to $1.2376, after the largest drop in more than a week.
- The British pound declined 0.7 per cent to $1.4068.
- The Japanese yen declined 0.4 per cent to 109.02
Bonds
- The yield on 10-year Treasuries rose four basis points to 2.70 per cent, the highest in almost four years on the biggest rise in more than a week.
- Germany's 10-year yield jumped six basis points to 0.69 per cent, the highest in more than two years on the largest surge in almost three weeks.
- Britain's 10-year yield rose one basis point to 1.458 per cent, the highest in a year.
Commodities
- West Texas Intermediate crude fell 1.1 per cent to $65.40 a barrel, the largest fall in more than a week.
- Gold fell 0.6 per cent to $1,342.08 an ounce.
