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US stocks fall, dollar rises amid trade tensions

Oct 18 2018 16:36
Yakob Peterseil and Randall Jensen, Bloomberg
Traders in the Standard & Poor's 500 stock index o

Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) react after it was announced that the Federal Reserve would increase interest rates. The Federal Reserves raised the interest rates for the firs

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US stocks slumped for a second day as investors continue to grapple with rising Treasury yields at the same time the Trump administration’s trade war with China adds to concern over global growth. The dollar rose.

The S&P 500 fell back below 2 800 and the Cboe Volatility Index popped above 18 as equities remained on uneven footing following last week’s sell-off.

Earnings dictated the biggest individual moves, with Textron sliding the most in the benchmark after disappointing results. Philip Morris surged, while Sealed Air tumbled after citing rising costs for weak profits. The weakness in American stocks comes after China sank overnight, bringing losses in its major benchmark to 30% since January highs. European shares were mixed.

Treasuries that had stabilised following last week’s rout remained under pressure for a second day, with investors ditching the debt after the Federal Reserve meeting minutes brought no signs the central bank will turn dovish any time soon. The dollar rose against major peers, while most emerging currencies retreated.

“The market is freaked out over interest rates. Plus some of the earnings - IBM, Home Depot - the home-building group was very, very weak,” said Donald Selkin, chief market strategist at Newbridge Securities. “It’s the higher rate scenario. A lot of the big earnings are next week and after - the high fliers - maybe they’ll be able to salvage things.”

As earnings season picks up steam, investors continue to assess a host of macroeconomic issues. The Fed minutes underscored the central bank’s intention to keep raising rates at the same time the Trump administration presses its trade war with China. Europe remains on tenterhooks over Brexit negotiations and the Italian budget drama.

Elsewhere, most metals traded lower in London after being hurt by the strengthening dollar and Chinese growth concerns. Emerging-market assets also fell. The British pound reversed losses as UK Prime Minister Theresa May said she is weighing a plan that would keep the U. bound to European rules for longer.

Here are some key events for the rest of this week:

Third-quarter GDP for China comes Friday in addition to last month’s retail sales and factory output.

These are the main moves in markets: 

Stocks

The S&P 500 Index declined 0.6% as of 10:02 New York time. The Stoxx Europe 600 Index fell. 0.1%. The UK’s FTSE 100 Index fell 0.2%. Germany’s DAX Index dropped 0.2%. The MSCI Emerging Market Index sank 0.8%. The MSCI Asia Pacific Index declined 0.6%.

Currencies

The Bloomberg Dollar Spot Index rose 0.2%. The euro fell 0.1%to $1.1493. The British pound fell 0.1% to $1.3102. The Japanese yen increased 0.1% to 112.56 per dollar.

Bonds

The yield on 10-year Treasuries was steady at 3.20%. Germany’s 10-year yield was little changed at 0.46%. Britain’s 10-year yield increased one basis points to 1.59%, the first advance in more than a week. Italy’s 10-year yield gained four basis points to 3.583%, the highest in more than four years.

Commodities

West Texas Intermediate crude decreased 1.6% to $68.65 a barrel, the lowest in a month. Gold rose 0.1% to $1 223.61 an ounce.

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