(Bloomberg) — Stocks dropped as a surge in Treasury yields added to concern over stretched valuations amid an uneven economic rebound.
The S&P 500 extended losses into a second day as 10-year yields jumped to as high as 1.4859%, with bonds now pricing in the highest five-year inflation expectations since 2008. Weak readings on the U.S. labor market and service industries also weighed on equities. Most major groups in the benchmark stock gauge fell, with big tech dragging down the Nasdaq 100 by about 1.5%. The Dow Jones Industrial Average outperformed, led by gains in Boeing Co. and JPMorgan Chase & Co. Cryptocurrency-exposed shares rallied as Bitcoin topped $50,000.
Growth at American service providers slowed to a nine-month low in February, when severe winter weather gripped much of the nation and limited activity. Meanwhile, the number of employees at U.S. businesses rose by less than expected, underscoring the jobs market’s struggle to recover despite a decline in Covid-19 infections in recent weeks. The Senate is planning to formally open debate on President Joe Biden’s pandemic-relief bill as soon as Wednesday afternoon.
“The markets have been all over the place for the past few days, alternating between ‘risk-on’ and ‘risk-off’ as investors have tried to weigh the impact of rising yields against the prospects of a strong economic rebound with the ongoing Covid vaccine rollouts,” said Fawad Razaqzada, an analyst at ThinkMarkets.
Buying U.S. stocks with borrowed money has yet to become excessive even after a bull-market surge, according to Stephen Suttmeier, a Bank of America Corp. analyst. He cited a comparison between the total amount of margin debt and the S&P 500’s market value in a report Monday. Margin loans increased 66% to a record $798.6 billion for the 10 months ended in January, data compiled by the Financial Industry Regulatory Authority show. The latest total equaled 2.5% of the S&P 500’s value, below a peak of 3.1% in January 2014.
“Investors are not over-levered,” Suttmeier wrote.
Some key events to watch this week:
OPEC+ meeting on output Thursday.U.S. factory orders, initial jobless claims and durable goods orders are due Thursday.The February U.S. employment report on Friday will provide an update on the speed and direction of the nation’s labor market recovery.
These are some of the main moves in markets:
Stocks
The S&P 500 dipped 0.5% as of 10:34 a.m. New York time.The Stoxx Europe 600 Index decreased 0.4%.The MSCI Asia Pacific Index gained 1.1%.The MSCI Emerging Market Index advanced 1.3%.
Currencies
The Bloomberg Dollar Spot Index gained 0.4%.The euro decreased 0.3% to $1.2053.The Japanese yen depreciated 0.4% to 107.08 per dollar.
Bonds
The yield on 10-year Treasuries rose nine basis points to 1.48%.Germany’s 10-year yield climbed six basis points to -0.30%.Britain’s 10-year yield jumped 10 basis points to 0.782%.
Commodities
West Texas Intermediate crude advanced 1.6% to $60.73 a barrel.Gold slid 1.5% to $1,711.46 an ounce.Silver fell 2.8% to $26.03 per ounce.
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