U.S. Stocks Slump With Bonds as Dollar Fluctuates: Markets Wrap

(Bloomberg) -- U.S. stocks headed for the third decline in four days, Treasuries slipped and the dollar churned in place as investors come to terms with the likelihood that interest rates will rise next week.

The S&P 500 Index slumped to 1.2 percent below its all-time high with the Federal Reserve all but certain to raise borrowing costs March 15. Energy producers led declines, and health-care shares slid Tuesday after President Donald Trump promised in a tweet to lower drug prices in the U.S. Large-cap tech shares advanced. The yield on 10-year Treasury notes rose to 2.51 percent, while the dollar was little changed. Copper fell to a one-month low.

Bets the global economy is strong enough to withstand rising borrowing costs helped stoke stock gauges to records last week, even as a U.S. interest rate hike this month seemed to become a near certainty. With valuations on the S&P 500 near the highest since 2002 and after the longest weekly rally in 16 months, investors now seem to be waiting for a fresh catalyst.

“Financial market sentiment behaves like a boat tacking into a moderate headwind: progress is being made, albeit choppily,” Kit Juckes, a London-based global strategist at Societe Generale SA, wrote in a note. “The headwind, of course, is the Fed, and the painfully slow grind higher in rates, especially 10-year Treasury yields.”

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What's ahead for the markets:

• Japanese data on balance of payments and gross domestic product are due Wednesday, along with Chinese trade figures. China reports on inflation on Thursday.
• Mario Draghi probably won't flinch at Thursday's ECB meeting even after headline inflation reached its 2 percent target in February. He's expected to keep QE going until the end of the year with underlying price pressures muted. 
• U.S. jobs data for February are due Friday. Employers probably added around 190,000 workers to payrolls, in line with the average over the past six months and a sign of steady job growth, economists forecast.

Here are the main moves in markets:

Stocks

• The S&P 500 lost 0.3 percent to 2,368.23 at 4 p.m. in New York, capping its first two-day slide since January.
• Health-care shares fell 0.5 percent. In a tweet shortly before 9 a.m. New York time, Trump said he's working on a “new system where there will be competition in the drug industry.”
• The Stoxx Europe 600 fell 0.3 percent, after a 0.5 percent drop on Monday.

Currencies

• The dollar was little changed as traders waited out the event risk stacked in the latter half of the week. The Bloomberg Dollar Spot Index was virtually unchanged, while the euro fell 0.1 percent to $1.0570.
• The British pound dropped 0.3 percent to 1.2206 versus the dollar and touched a seven-week low.

 
Bonds

• Yields on 10-year Treasuries rose one basis point to 2.51 percent. Treasuries have fallen seven straight days.
• The three-year sector led losses after the government's monthly auction of the maturity drew a higher-than-expected yield.
• The German 10-year yield declined two basis points to 0.319 percent

Commodities

• West Texas Intermediate crude fell 16 cents to settle at $53.14 a barrel. Saudi Oil Minister Khalid al-Falih said that OPEC and its partners are making good progress in delivering promised output curbs.
• Copper fell a fourth day as stockpiles in London Metal Exchange-tracked warehouses jump 33 percent in 2 days, most since 2004.
• Gold for delivery in three months fell 0.7 percent $1,217.30 an ounce after dropping 0.8 percent in the previous session.
• Rhodium's on the best run in a decade on expectations of more demand for the material that's used in cleaning toxic car emissions.

--With assistance from Eddie Van Der Walt Samuel Potter Mark Shenk Susanne Barton and Elizabeth Stanton

To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net.

To contact the editor responsible for this story: Jeremy Herron at jherron8@bloomberg.net.