(Bloomberg) — The rapid slide in US stocks that followed a weak $42 billion sale of Treasuries underscored the fragility of global financial markets in the wake of historic volatility.
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After an equity surge driven by the Bank of Japan’s dovish signals, the S&P 500 wiped out its gains. Investors shunned the 10-year US bond auction, which drew a yield that was well above the pre-sale indicative level. The weaker-than-expected demand signaled the recent rally may have run its course. Treasuries also came under pressure as 17 blue-chip companies offered $31.8 billion of debt, the highest amount of US investment-grade issuance this year.
At Nationwide, Mark Hackett says the events of the past week have been a “masterclass” in how emotions can dominate the movement in markets.
“Stocks remain vulnerable,” said Fawad Razaqzada at City Index and Forex.com. “More evidence of a bottom is needed to excite the bulls again. Overall, sentiment remained cagey. Not many people were confident to buy this latest dip, especially with US CPI looming next week.”
Following a gain of almost 2% earlier in the session, the S&P 500 closed 0.8% lower. Nvidia Corp. led losses in megacaps. Super Micro Computer Inc. tumbled 20% on disappointing earnings. In late trading, Warner Bros. Discovery Inc., the parent of CNN and TNT, plunged after posting a charge of $9.1 billion as it wrote down the value of its traditional TV networks.
Treasury 10-year yields rose six basis points to 3.95%. The Japanese yen fell about 2% after the BOJ signaled it would be cautious about raising interest rates. That also eased pressure on currencies that had been hammered as investors abandoned yen-funded bets on riskier assets. Mexico’s peso rallied.
Just like several other market observers, Peter Boockvar said Wednesday’s 10-year Treasury auction was “terrible.”
“I still think there is a good chance that long-term rates stay higher for a while and for not all good reason, aka, debts and deficits finally matter and foreigners are not much of a help anymore,” said the writer of The Boock Report. “I get the economic bull case for longer term Treasuries, maybe it’s just not that easy as the bond bull market of 40 years is over.”
“As 10-year Treasury yields have plunged to near 3.7% (from near 4.5% earlier this year), it makes sense to us to take some profit,” said Stephen Dover at Franklin Templeton Institute.
A $25 billion sale of 30-year bonds will mark the Treasury’s final coupon auction of the week on Thursday. Before that, traders will sift through jobless claims figures after last week’s weak jobs report fueled worries that the Federal Reserve’s policies are cooling the labor market too much.
Despite the recent pullback in equities, strategists at JPMorgan Chase & Co. say there’s little evidence the market entered oversold territory like in October 2023, for example.
“On our calculations for the equity allocation at the global level to return to post-2015 average levels, equity prices would have to decline by a further 8% from here,” Nikolaos Panigirtzoglou and his colleagues wrote in a note Wednesday.
Corporate Highlights:
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Walt Disney Co. gave a mixed picture as it reported third-quarter results on Wednesday, with weakness at its famed theme parks offsetting its first-ever profit in streaming.
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Shopify Inc. reported second-quarter sales and profit that beat analysts’ estimates, showing that the Canadian e-commerce company is managing to navigate cautious consumer spending.
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CVS Health Corp. lowered its 2024 earnings outlook for the third straight quarter and announced cost-cutting measures to save $2 billion over several years as health-care expenses continue to soar.
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Ride-hailing company Lyft Inc. posted second-quarter bookings and issued an outlook that fell short of Wall Street’s expectations.
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Boeing Co. is redesigning the fuselage component that blew out of a nearly new 737 Max 9 aircraft mid-flight in January, as the planemaker seeks to draw lessons from the accident that has thrown it into crisis.
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Novo Nordisk A/S reported disappointing sales of its blockbuster weight-loss treatment Wegovy, a rare setback for the Danish drugmaker as it braces for more competition in the booming market.
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Rivian Automotive Inc. is sticking with a full-year vehicle production target unchanged from last year, but its chief executive officer expects output to grow in 2025 even with a plant shutdown looming.
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Brookfield Asset Management Ltd. said its assets under management rose to a record of approximately $1 trillion, and it reported profit that increased from a year ago but still missed analysts’ expectations.
Key events this week:
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Germany industrial production, Thursday
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US initial jobless claims, Thursday
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Fed’s Thomas Barkin speaks, Thursday
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China PPI, CPI, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.8% as of 4:04 p.m. New York time
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The Nasdaq 100 fell 1.2%
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The Dow Jones Industrial Average fell 0.6%
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The MSCI World Index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.1%
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The euro was little changed at $1.0922
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The British pound was unchanged at $1.2691
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The Japanese yen fell 1.8% to 146.87 per dollar
Cryptocurrencies
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Bitcoin fell 3% to $54,848.88
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Ether fell 5.7% to $2,348.53
Bonds
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The yield on 10-year Treasuries advanced six basis points to 3.95%
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Germany’s 10-year yield advanced seven basis points to 2.27%
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Britain’s 10-year yield advanced three basis points to 3.95%
Commodities
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West Texas Intermediate crude rose 3% to $75.40 a barrel
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Spot gold fell 0.2% to $2,386.65 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Robert Brand, Sujata Rao and Winnie Hsu.
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