Stocks Slump as Traders Weigh Outlook for Stimulus: Markets Wrap

(Bloomberg) -- The end-of-month rebound in global equities faded as investors weighed prospects for fiscal stimulus in the U.S. and the outlook for the coronavirus pandemic. Oil tumbled on concern slow growth will limit demand.

The S&P 500 Index slumped, with more than two stocks falling for every one that advanced, after talks on expanding aid ended for the day with plans to resume discussions tomorrow. An exchange-traded fund that tracks the S&P 500 gained 0.2% in after-hours trading after a study showed a Regeneron Pharmaceuticals Inc. antibody cocktail may help treat coronavirus patients outside of the hospital.

Oil fell toward $39 a barrel in New York. Treasuries were little changed, while the dollar weakened.

With the pandemic's global death toll exceeding 1 million and virus cases on the upswing in many locales, investors are pinning hopes on a $2.2 trillion stimulus proposal by Democrats to help support economic growth. End-of-month and end-of-quarter portfolio rebalancing could also be exacerbating market moves as September comes to a close.

“A lot of the fiscal stimulus conversation is driving the markets here in the near-term,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management. At the same time, there “has been a fear that you'd have a resurgence in cases in the fall and some people have chosen to take their money and sit on the sidelines.”

The negotiations between the Trump administration and congressional Democrats are reaching a critical juncture this week. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke Tuesday morning for 50 minutes and are set to speak again Wednesday.

Markets are also girding for the first presidential debate Tuesday, and traders have pushed up overnight implied volatilities on Mexico's peso in anticipation of price swings.

Elsewhere, Banks led broad-based declines in the Stoxx Europe 600 index. The MSCI AC Asia Pacific Index was little changed as South Korean shares advanced, while Hong Kong stocks fell. Nippon Telegraph & Telephone Corp. announced plans to turn its wireless carrier unit NTT Docomo Inc. into a wholly owned subsidiary in a $40 billion buyout. NTT Docomo shares surged by their limit at the close in Tokyo.

Here are some key events coming up:

• China purchasing manager indexes are due Wednesday, and expected to show September manufacturing improved slightly while non-manufacturing moderated from August's level.
• The EIA crude oil inventory report comes out Wednesday.
• The September U.S. employment report on Friday will be the last before the November election.

These are the main moves in markets:

Stocks

• The S&P 500 Index fell 0.5% as of 4 p.m. New York time.
• The Stoxx Europe 600 Index dipped 0.5%.
• The MSCI Asia Pacific Index was little changed.

Currencies

• The Bloomberg Dollar Spot Index declined 0.3%.
• Sterling rose 0.2% to $1.2866.
• The Japanese yen weakened 0.2% to 105.67 per dollar.

Bonds

• The yield on 10-year Treasuries fell less than one basis point to 0.65%.
• Germany's 10-year yield dipped two basis points to -0.55%.
• Britain's 10-year yield decreased two basis points to 0.18%.
• Italy's 10-year yield declined three basis points to 0.85%.

Commodities

• West Texas Intermediate crude tumbled 3.8% to $39.04 a barrel.
• Gold rose 0.8% to $1,897.22 an ounce.
• Silver rose 2.3% to $24.23 per ounce.

©2020 Bloomberg L.P.