US stocks drop as bond rally sinks bank shares

Bloomberg

Treasuries rallied, sending 10-year yields to the lowest since November, while the dollar slumped with US stocks as investors reassessed post-election market moves spurred by speculation Donald Trump’s policies would jumpstart American economic growth.
Trump yesterday gave investors little reason to add to bets that had taken the dollar to a 14-year high and stocks to records. Some unwound those positions, sending the S&P 500 to its biggest drop in two weeks, the greenback to a one-month low and emerging-market equities to the highest since the election. Banks shares led declines in the S&P 500 a day before three of the largest US lenders are due to report fourth-quarter results. Oil rose above $53 a barrel as Saudi Arabia said it had cut production.
Trump’s press conference left investors with few specifics on the timing and scope of planned policies from infrastructure spending to trade pacts. His victory set off rallies in the dollar and global equities at the expense of bonds as traders bet fiscal easing would ignite growth. Health-care stocks were pressured Thursday as Trump said he’d force the pharmaceutical industry to bid for government business in the world’s largest drug market.
“The thing people were looking for was further context about fiscal spending plans and there wasn’t anything,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London, who recommends buying volatility. “Last year the market didn’t always get it right. It could be that it has misread what will happen this year as well.”

Stocks
The S&P 500 Index dropped 0.7 percent to 2,259.44 at 10:49 a.m. in New York, after closing on Wednesday two points from a record. Delta Air Lines Inc. fell 2.4 percent after results disappointed. The carrier was the first S&P 500 company to report fourth-quarter earnings. JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. are slated to report tomorrow. The Nasdaq Composite Index fell for the first time in eight days, halting the longest rally since June that had taken it to five consecutive record closes. The Stoxx Europe 600 Index lost 0.2 percent, while the FTSE 100 erased a loss and headed for a record 13th straight advance. Emerging-market equities rallied the most since November, as the rallies in crude and metals lifted commodities producers.

Currencies
The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.7 percent, paring a retreat that topped 1 percent. The euro strengthened 0.5 percent to $1.0639. Turkey’s lira jumped 2 percent to 3.7866 versus the dollar. The central bank is implementing measures to force banks to borrow at a higher rate, according to a person with direct knowledge of the matter. The South African rand led the biggest rally in emerging-market currencies since March after Deutsche Bank AG analysts said they’ve turned “fundamentally bullish” on the currency.

Bonds
The benchmark 10-year Treasury yield fell four basis points to 2.33 percent, touching the lowest level since Nov. 30. German 10-year yields dropped one basis point to 0.32 percent, while those in the U.K. slid five basis points to 1.30 percent.

Commodities
Gold rose above $1,200 an ounce for the first time since November as the dollar sagged. Copper added 1.2 percent to $5,779 a metric ton, the highest in a month after Indonesia confirmed a halt to concentrate exports. Zinc rose 1.4 percent. West Texas Intermediate crude climbed 2.2 percent to $53.37 a barrel, extending its biggest rally in almost six weeks after government data published Wednesday showed U.S. refiners processed a record amount of crude.