Stocks fall as rally stalls, yields climb on Trump policy worry
Bitcoin extends staggering rally; eyes $90K
Tariff worries weigh on euro and yuan
China exposure drags European stocks lower
Updated at 2:26 p.m. ET/1926 GMT
By Chuck Mikolajczak
NEW YORK, Nov 12 (Reuters) -A gauge ofglobal stocks fell onTuesday after five straight sessions of gains while the dollar hit itshighest level in over four months as investors assess theimpact of U.S. President-elect Donald Trump's likely policies on growth and inflation.
Investors have flocked intoassets expected tobenefit from Trump policies for his second term in office, afterhe pledged to impose high tariffs on imports from key trading partners, as well as lowertaxes and loosen government regulations.
The S&P 500 .SPX has surged recently, partly driven by a jump in shares of banks .SPXBK, which are likely to benefit from a reduced regulatory burden. Domestically focused small-cap stocks have jumped on expectations for less competition from tariffs and lower tax rates, withthe Russell 2000 .RUT vaultingto a three-year high on Monday.
Bitcoin, the world's biggest cryptocurrency, has shot upabout 30% since the Nov. 5 election, rocketing toward the $90,000 mark. Trump is seen as a proponent of cryptocurrencies, promising during his campaign to make the United States the"crypto capital of the planet."
U.S. stocks have rallied since the election, with each of Wall Street's three major indexes closing at record levels on Monday.
But concerns that Trump's policies could rekindle inflationafter a long battle to reduce price pressures followingthe COVID-19 pandemic have pushed U.S. Treasury yields and the dollar higher. Markets will get the latest inflation reading on Wednesday in the consumer price index (CPI) for October.
"The 10-year Treasury yield is kind of creating a headwind against the equity rally," said Jack Ablin, chief investment officer at Cresset Capital in Chicago."There's sort of these conflicting signals where investors are celebrating all of these growth initiatives but the bond market is pushing back."
The Dow Jones Industrial Average .DJI fell 250.15 points, or 0.56%, to 44,042.98, the S&P 500 .SPX fell 5.53 points, or 0.09%, to 5,995.82, and the Nasdaq Composite .IXIC rose 0.02 points, or 0.00%, to 19,298.79.
Shares of Home Depot HD.N shed 0.1%,giving up earlier gains, after the home improvement retailer reported quarterly results.
In Europe, shares closed lower, weighed down by names with a large exposure to China, with news thatTrump was expected to select U.S. Senator Marco Rubio as his secretary of state. Rubio is seen as the most hawkish option on Trump's list of candidates.
MSCI's gauge of stocks across the globe .MIWD00000PUS fell 5.26 points, or 0.61%, to 857.84. The STOXX 600 .STOXX index lost 1.98%, while Europe's broad FTSE EuroFirst 300 index .FTEU3 closed down 40.36 points, or 1.99%, as both suffered their biggest daily percentage drops since early August.
The yield on benchmark U.S. 10-year notes US10YT=RR rose 12.2 basis points to 4.43%, from 4.308% late on Friday; the bond market was closed on Monday for a federal holiday.
Aside from the CPI data, several Federal Reserve officials are speaking thisweek following the central bank's policy decision last week tocut interest rates by 25 basis points.
Richmond Fed President Thomas Barkin said that with inflation close to the Federal Reserve's 2% target, the labor market resilient and the U.S. central bank in the process of lowering borrowing costs, policymakers are ready to respond if inflation pressures rise or the job market weakens.
Minneapolis Federal Reserve Bank President NeelKashkari said the economy is "in a good place" and he feels U.S. monetary policy is currently "modestly restrictive," with short-term borrowing costs continuing to slow inflation and the economy, but not by a lot.
The dollar index =USD, which measures the greenback against a basket of currencies, rose 0.54% to 105.99, with the euro EUR= down 0.36% at $1.0616. The greenback has risen in four of five sessions since the election to reach 106.17,its highest level since May 1.
Against the Japanese yen JPY=, the dollar strengthened 0.66% to 154.72. Sterling GBP= fell 1.01% to $1.2739.
The dollar CNH= strengthened 0.22% to 7.243 versus the offshore Chinese yuan.
The greenback is expected to continue to strengthen against China's currency and those sensitive to its economy as a result of Trump's trade policies and because of expectations of higher U.S. Treasury yields. Markets have been scaling back expectations for more rate cuts from the Federal Reserve, currently pricing in a 58.7% chance of a 25-basis-point cut at its December meeting, down from 77.3% a week ago, according to CME's FedWatch Tool.
U.S. crude CLc1 rose 0.28% to $68.23 a barrel and Brent LCOc1 rose to $71.99 per barrel, up 0.22% on the day,holding near a two-week low after OPEC's latest downward revision for demand growth.
World FX rates YTD http://tmsnrt.rs/2egbfVh
Reporting by Chuck Mikolajczak in New York
Additional reporting by Lisa Mattackal and Purvi Agarwal in Bengaluru
Editing by Matthew Lewis and Leslie Adler
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
