While you were sleeping: Stocks drop with bonds
By Margreet Dietz
July 7 (BusinessDesk) - Equities followed bonds lower, as a disappointing French government debt auction fuelled concern about the outlook for government bonds on both sides of the Atlantic as central banks signal a bias towards raising interest rates.
Also adding to the mood were minutes from the latest European Central Bank meeting, released on Wednesday, which showed that policy makers discussed “revisiting the easing bias with respect to the APP [asset purchase program] purchases.”
German 10-year bunds dropped, pushing yields 9 basis points higher to 0.56 percent, the highest level since January 2016, while yields on their US Treasury counterparts traded as high as 2.39 percent, according to Bloomberg.
And yields might continue their upward path.
Ten-year Treasury yields are on course to move “toward 3 percent” this year, DoubleLine Capital’s Chief Executive Officer Jeffrey Gundlach told Bloomberg.
Wall Street followed the negative sentiment for sovereign debt. In 3:05pm trading in New York, the Dow Jones Industrial Average dropped 0.6 percent, while the Nasdaq Composite Index shed 0.8 percent. In 2.50pm trading, the Standard & Poor’s 500 Index retreated 0.8 percent.
"More than anything you’ve had a fairly good-sized move up on the 10-year Treasury [yield] over a short period," Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, told Reuters. "Investors are on a very short term reacting to where yields are at this moment compared with only a week ago."
The Dow moved lower as slides in shares of General Electric and those of Intel, recently 3.9 percent and 1.8 percent weaker respectively, outweighed gains in shares of Wal-Mart Stores and those of DuPont, recently up 0.6 percent and 0.4 percent respectively.
Meanwhile, a report US employers added fewer jobs than economists had expected did little to alter the view of a solid labour market, and bets for another Federal Reserve interest rate hike this year.
An ADP Research Institute report showed US private payrolls rose by 158,000 in June, following a revised 230,000 increase in May.
A survey of economists by Reuters had predicted a gain of 185,000 while a poll by Bloomberg had anticipated an increase of 188,000.
"The slowdown in hiring, in our view, is a function of the difficulty in hiring workers," John Ryding, chief economist at RDQ Economics in New York, told Reuters. "Companies remain very reluctant to lay off workers and this is a continued sign of the tightness of the labour market."
On Friday the government will publish its nonfarm payrolls data, which, according to a Reuters survey, likely increased by 179,000 last month after May's 138,000 gain. The unemployment rate is forecast unchanged at 4.3 percent.
In Europe, the Stoxx 600 Index ended the day with a 0.7 percent decline from the previous close. The UK’s FTSE 100 Index slid 0.4 percent, France’s CAC40 Index decreased 0.5 percent, while Germany’s DAX Index fell 0.6 percent.