Stocks, Bonds Drop as Focus Turn to Trade and Jobs: Markets Wrap

(Bloomberg) --

U.S. stocks fell for a second day and Treasury yields climbed in the wake of the Federal Reserve's latest rate signal, with investors awaiting Friday's jobs report and news on trade talks. The dollar rose.

The S&P 500 Index moved further away from its record on concern the U.S.-China trade deal remains elusive. Energy shares sank with oil, while Caterpillar Inc. slumped as the announcement of a record dividend underwhelmed investors. Tesla Inc. rallied on plans to raise about $2 billion through debt and stock offerings. Beyond Meat Inc. had the best debut session of any U.S. listing in more than a decade among IPOs that raised at least $200 million.

Read more: Once-Bullish Rates Traders Retreat After Being Bruised by Powell

Treasury yields jumped as a wave of bets that the Fed will keep rates on hold longer than expected -- before possibly cutting them -- was unleashed in derivatives markets. Chairman Jerome Powell's comments on the “transient” nature of factors keeping inflation below the target prompted a reassessment, with wagers on when a rate cut might happen shifting from December 2019 into 2020. The next clue on the health of the economy will be Friday's jobs report.

“Many investors had thought that the Fed might cut rates again this year, and that was built into some of the expectations,” said Kate Warne, an investment strategist at Edward Jones. “The Fed's commentary that inflation was transitory really conveyed that the Fed wasn't seeing a need to cut rates in response to lower inflation. That's part of why we saw the sell-off.”

Read more: Even a Strong U.S. Wage Number May Fail to Ignite Inflation

Trade also remained on the radar. Treasury Secretary Steven Mnuchin and other U.S. officials have repeatedly said in recent days that the two sides are making progress with Vice Premier Liu He due to lead a 100-member delegation to Washington next week for what are seen as crucial talks. While people familiar with the discussions say difficult issues remain unresolved, both sides continue to signal they are focused on striking a deal.

Elsewhere, oil tumbled to its lowest in a month despite the promise of tighter sanctions on Iran, as investors saw the U.S., Russia and Saudi Arabia all potentially filling the gap. Britain's 10-year yield climbed as the Bank of England held rates steady and hinted at future hikes.

Here are some notable events this week:

• Companies reporting earnings include: HSBC and Macquarie.
• Friday brings the U.S. jobs report: non-farm payrolls are projected to rise by about 190,000 in April. Economists expect an unemployment rate of 3.8 percent, with average hourly earnings growth picking up to 3.3 percent.

These are some of the main moves in markets:

Stocks

• The S&P 500 lost 0.2 percent to 2,917.52 as of 4 p.m. New York time.
• The Dow Jones Industrial Average fell 0.5 percent, and the Nasdaq-100 slid 0.4 percent.
• The Stoxx Europe 600 Index sank 0.6 percent.
• The MSCI Asia Pacific Index dipped 0.1 percent.

Currencies

• The Bloomberg Dollar Spot Index gained 0.3 percent.
• The euro declined 0.2 percent to $1.1173.
• The British pound fell 0.1 percent to $1.3034.
• The Japanese yen lost 0.1 percent to 111.51 per dollar.

Bonds

• The yield on 10-year Treasuries jumped five basis points to 2.55 percent.
• Britain's 10-year yield climbed four basis points to 1.187 percent.
• Germany's 10-year yield increased two basis points to 0.03 percent.

Commodities

• The Bloomberg Commodity Index fell 0.9 percent.
• West Texas Intermediate crude sank 2.8 percent to $61.81 a barrel.
• Gold slid 1 percent to $1,272 an ounce.

--With assistance from Andreea Papuc, Adam Haigh, Namitha Jagadeesh and Samuel Potter.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth

©2019 Bloomberg L.P.