Bonds Plunge, Stocks Undo Gains on Inflation Risk: Markets Wrap

LAGOS (Capital Markets in Africa) — Inflation concerns are rattling investors worldwide once again, fueling a selloff in bonds and sending U.S. stocks down from record highs.

Ten-year Treasury yields climbed above 1.75% for the first time since January 2020, while the 30-year breached 2.5% for the first time since August 2019. The Nasdaq 100 Index, a benchmark for high-valuation stocks that are sensitive to rising yields, sank, with Apple Inc., Microsoft Corp. and Tesla Inc. leading the declines.

The S&P 500 erased gains from Wednesday, when the closely-watched benchmark hit an all-time high. The Dow Jones Industrial Average was little changed, with JPMorgan Chase & Co. leading the financials higher amid the rise in yields. The Federal Reserve’s apparent willingness to keep pumping support into the economy and let it run hotter has spurred bets on faster growth and inflation, sending market expectations of price pressures to multi-year highs.

”The fact that they’re standing so steadfast in what they’re doing right now, I think is really their attempt to get the market used to the new normal,” said Arthur Hogan, chief market strategist at National Securities Corp.

The dollar held gains after initial jobless claims unexpectedly rose last week to the highest since mid-February.

In Asia and Europe, stocks were boosted by lingering enthusiasm from the Fed’s outlook for stronger growth. Automakers and banks, which tend to outperform during cyclical upswings, were higher in Europe. Japan’s Topix jumped past the 2,000 mark for the first time since 1991, becoming the region’s top-performing major equity index this year.

Elsewhere, oil slipped after U.S. crude stockpiles topped half a billion barrels and the International Energy Agency said global supplies are plentiful. Bitcoin traded around $58,000.
Japan’s government bond yields rose on a Nikkei report that the Bank of Japan is considering widening the trading range around the 10-year target, which could spur concerns about policy tightening.

These are some key events this week:
Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.

These are some of the moves in markets:
Stocks
The S&P 500 Index sank 0.6% to 3,948.64 as of 10:05 a.m. New York time, the largest decrease in two weeks.
The Dow Jones Industrial Average was little changed at 33,004.73.
The Nasdaq Composite Index fell 1.6% to 13,312.90, the lowest in more than a week on the largest fall in more than a week.
The Nasdaq 100 Index fell 1.7% to 12,975.75, the biggest fall in more than a week.
The Stoxx Europe 600 Index climbed 0.3% to 426.25.

Currencies
The Bloomberg Dollar Spot Index rose 0.4% to 1,138.53, the biggest advance in more than a week.
The euro fell 0.5% to $1.1921, the largest fall in more than a week.
The British pound decreased 0.4% to $1.3912.
South Africa’s rand weakened 0.7% to 14.7546 per dollar.

Bonds
The yield on two-year Treasuries climbed three basis points to 0.16%, the highest in three weeks on the biggest surge in three weeks.
The yield on 10-year Treasuries jumped 10 basis points to 1.75%, the highest in about 14 months on the largest surge in three weeks.
The yield on 30-year Treasuries gained seven basis points to 2.49%, the highest in almost 20 months.
Germany’s 10-year yield climbed four basis points to -0.25%, the highest in three weeks.
Britain’s 10-year yield increased seven basis points to 0.895%, the highest in more than 21 months.

Commodities
West Texas Intermediate crude sank 2.6% to $62.93 a barrel, hitting the lowest in more than two weeks with its fifth straight decline and the largest tumble in almost three weeks.
Gold depreciated 1.2% to $1,724.93 an ounce, the weakest in a week on the biggest tumble in more than two weeks.

Source: Bloomberg Business News