S&P 500, Dow slide as bond yields hit 11-year highs and North Korea says it will ‘work towards complete denuclearisation’
US stock indexes fell on Thursday as investors worried that investor optimism over the initial results of the summit between Donald Trump and Kim Jong-un was starting to wane, while Canadian stocks fell following the S&P/TSX composite index’s sharpest daily loss in two months.
According to Reuters, North Korea said on Thursday it would “work towards complete denuclearisation” of the Korean peninsula but made no specific pledge at the Trump-Kim summit in Singapore to scrap its nuclear weapons programme.
U.S. dollar slips after soaring to 2-month high, rate outlook mixed Read more
The 10-year Treasury yield hit its highest level since January 2009 as traders sold bonds to take profits after the 10-year yield broke above 3% last week.
“Investors are making adjustments to the market expectations as it relates to both North Korea and Trump versus the meeting and particularly his announcement last night,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.
He said the gains we have seen on the world equities markets over the last few weeks could be starting to dissipate given the potential for a rate increase.
S&P 500 and Dow Jones Industrial Average indexes were both down more than 0.4% as investors worried that early gains on the Trump-Kim summit were running out of steam, while losses were relatively small on the Nasdaq.
While the three major indexes all lost more than 0.5%, the Nasdaq Composite still beat all three indexes. The index was last down less than 0.15%.
The S&P 500 had hit an intraday record high earlier in the session.
The positive outlook from chipmaker Nvidia helped the S&P Technology index gain 0.32%.
Nvidia’s shares rose 6.5% after the chipmaker’s quarterly revenue topped estimates and the company forecast current-quarter revenue above analysts’ estimates.
All eyes on the Federal Reserve’s next move
Further bolstering the week’s early optimism was minutes from the Fed’s July meeting released on Wednesday showing a growing divide between hawks and doves.
The minutes also showed several policymakers believed the economy was strong enough to warrant at least one more interest rate increase this year.
Two former officials said the Fed could increase rates by as many as four times this year.
Fed funds futures, which trade based on expectations for the fed funds rate, show about a 70% chance of a rate increase in September, compared with 50% a week ago.
Trump has repeatedly criticized the Fed for raising rates, saying they were weighing too heavily on the US economy.
The central bank is expected to announce a plan to begin unwinding its $4.2tn portfolio of bonds and mortgages when it next meets on Sept. 25-26.
At 9:52am ET, the Dow Jones Industrial Average was down 129.83 points, or 0.5%, at 25,334.56, the S&P 500 was down 12.21 points, or 0.47%, at 2,769.32 and the Nasdaq Composite was down 36.22 points, or 0.55%, at 7,467.72.
Futures indicate a more than 3% gain for the Dow on Friday.
Spot gold dropped 0.3% as investors moved into the dollar. U.S. gold futures gained 0.34%.
Gains in Chipotle Mexican Grill helped the S&P retail index rise 1.6%.
Shares of Snap Inc gained 2.1% after it posted second-quarter revenue that beat estimates. The social media company also said it was launching a new Snapchat application for large, institutional investors.
Declining issues outnumbered advancers on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.42-to-1 ratio favoured decliners.
The S&P 500 posted three new 52-week highs and 25 new lows; the Nasdaq Composite recorded 10 new highs and 154 new lows.
Reuters