US futures decline with stocks; Treasuries gain

Bloomberg

US equity futures dropped ahead of the latest American jobless data and as President Donald Trump floated cutting ties between the world’s two biggest economies. Treasuries gained alongside the dollar.
Contracts on the main US equity benchmarks extended declines after Trump said in a TV interview that he doesn’t want to talk to China’s President Xi Jinping “right now.” He also said he was “looking at” Chinese companies that trade on American exchanges but don’t follow US accounting rules. The Stoxx Europe 600 Index fell, with insurance and auto shares among the biggest laggards. Asian equities declined, with Japan and Australia suffering some of the steepest falls. Crude oil ticked up, recovering from Wednesday’s drop.
The rally in global equities from March lows is showing further signs of stalling this week amid comments from some big-name investors that stocks have run up too far amid the economic uncertainty. Fed Chairman Jerome Powell suggested that additional fiscal support could be needed to combat the effects of the pandemic. On that score, Republicans rejected a $3 trillion stimulus measure drafted by House Democrats, but the draft plan has the seeds for an eventual, smaller compromise.
“Views are beginning to firm that the 2020 bear-market rally may have run its course,” said Matthew Sherwood, head of investment strategy for multi-asset at Perpetual Investment Management Ltd.
Futures on the S&P 500 Index decreased 0.7% as of 8:08 am New York time and the Stoxx Europe 600 Index fell 2.4%.
While the MSCI Asia Pacific Index fell 1.6%, the MSCI Emerging Market Index fell 1.2%. The Bloomberg Dollar Spot Index rose 0.3% and the euro declined 0.3% to $1.0788. The British pound also sank 0.3% to $1.2194.
While the onshore yuan weakened 0.2% to 7.104 per dollar, the Japanese yen was little changed at 107.08 per dollar.
The yield on 10-year Treasuries sank three basis points to 0.62% and the yield on two-year. Treasuries dipped less than one basis point to 0.16%.
While Germany’s 10-year yield climbed less than one basis point to -0.53%, Britain’s 10-year yield rose one basis point to 0.222% and Japan’s 10-year yield declined less than one basis point to -0.002%. West Texas Intermediate crude increased 2.4% to $25.90 a barrel. While Brent crude gained 2.5% to $29.92 a barrel, gold weakened 0.1% to $1,714.45 an ounce.
Last hour of the day hasn’t been good for US stocks lately
US stocks have been dropping towards the end of their regular session in past couple of weeks.
“Wednesday’s, a late day S&P sell-off continued a trend over the last two weeks of weakness in the last hour of the day,” Susquehanna Financial Group LLP’s Chris Murphy wrote in a note. The gauge was negative in New York in eight of the 11 days, with a daily average performance of minus 0.34%, he said, compared with a 0.07% average gain.
The Smart Money Flow Index, which measures the Dow Jones Industrial Average 30 minutes into a session versus the end of the day, has been decreasing in the past few weeks, Murphy said. A trading maxim is that the action early in a session features “dumb money,” which reacts emotionally to news, while “smart money” like institutions wait until the end of the day.
With the growth of passive investments and other changes in dynamics that may be less true, but the decline in the SMF Index could be a sign “smart money” is selling.