Tremors in stocks, bonds leave no place to hide

Bloomberg

US stocks are on pace for the biggest two-day decline since August, while yields on benchmark government bonds are near April 2014 highs, as caution creeps into markets after one of the best starts to a year in recent history.
The S&P 500 Index fell the most in seven weeks and the Dow Jones Industrial Average slumped more than 200 points. Energy producers slumped with the price of crude. European equities headed for the worst day since November after Asian shares dropped.
Selling spread to other assets, with the 10-year Treasury yield pushing above 2.73 percent, the highest level since April 2014. Commodities retreated.
Equity markets are showing signs of wariness at the end of a hectic month as surging rates on government bonds test appetite for stocks at elevated valuations.
Investors are weighing whether stronger corporate earnings, a pick-up in economic growth and optimism over US tax cuts can continue driving up prices in markets that recently touched their highest on record; Goldman Sachs Group Inc. predicts a correction is on the horizon, but says any such pullback would be a buying opportunity.
“It clearly is a worldwide reaction as investors have maybe started to take notice of how much the valuations have come up,” said Peter Jankovskis, co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC. “It’s very clear that this particular bout of selling is originating overseas.”
Elsewhere, many commodities reversed losses as the dollar weakened. Bitcoin fluctuated around $11,000 before turning lower, and emerging-market stocks slumped.
Fed policy makers gathered for Chair Janet Yellen’s final meeting on interest rates on Wednesday before her term ends. President Trump delivers his first State of the Union address. Tech giants Microsoft Corp., Facebook Inc., SAP SE, Alibaba Group Holding Ltd., Apple Inc., Alphabet Inc. and Amazon.com Inc. will announce earnings. Large-caps Exxon Mobil Corp., Merck & Co. Inc., Roche Holding AG, Daimler AG, Deutsche Bank AG and Boeing Co. also report. US employers probably added more jobs in January than a month earlier.
Gauges of Chinese manufacturing and services industries were due on Wednesday.
The S&P 500 Index sank 1 percent, while the Dow Jones Industrial Average dropped 1.3 percent and the Nasdaq Composite Index fell 0.8 percent as of 12:07 pm New York time. The Stoxx Europe 600 Index dipped 0.9 percent, the largest decrease in at least six weeks. The MSCI Asia Pacific Index decreased 1.3 percent on the largest dip in almost eight weeks. The UK’s FTSE 100 Index dipped 1 percent.
The Bloomberg Dollar Spot Index was little changed after paring earlier losses. The euro was little changed at $1.2392, after reaching the highest level in more than three years. The British pound increased 0.4 percent to $1.4123. The Japanese yen gained 0.1 percent to 108.87 per dollar.
The yield on 10-year Treasuries increased two basis points to 2.71 percent, the highest in almost four years.