It's getting harder for S&P 500 to elude bond market's violence

Galtero Lara
Febrero 1, 2018

Health insurer UnitedHealth fell 4.3 percent, the most among Dow components, while Cigna's 6.4 percent drop was the biggest on the S&P 500. Leading indices in Europe and Asia also closed deep in the red. A simple question that may come to investors mind, is "why would I remain in equities when two-year US treasury bills can provide the same divided yield return of the S&P 500 at 2.12%?".

Yesterday's falls came shortly after senior executives at Goldman Sachs and Bank...

S&P 500 e-minis were up 11.75 points, or 0.42%, with 216 367 contracts traded.

However, the biggest decliners were defensive sectors - utilities, real estate and telecoms slid as USA 10-year treasury yields hit their highest since 2014. These sectors were negatively affected by higher interest rates.

U. S. stocks fell for a second straight day on Tuesday, with the Dow Jones Industrial Average tumbling as much as 352 points, hammered by a rise in bond yields and a decline in healthcare companies.

Up until Tuesday, the S&P 500 had enjoyed a record-long streak without consecutive drops of 0.5%, according to Bespoke Investment Group.

Investors were spooked by the first two-day decline on Wall Street so far this year, which prompted a flight to the safety of USA government bonds, said Gennadiy Goldberg, interest rates strategist at TD Securities in NY.

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While the Federal Reserve is not expected to lower interest rates at its two-day meeting that starts on Tuesday, outgoing chair Janet Yellen's last statement will be scrutinised for clues on the future path of rate hikes.

In the broad market, the health care, energy and financial sectors led losses for the day.

The Cboe Volatility Index, the most widely followed barometer of expected near-term volatility for US stocks, closed up 2.76 points, or almost 25 percent, at 13.84, its highest close since August 18.

The report added to growing concerns around weak sales of the $US999 phone ahead of Apple reporting its quarterly results on Thursday. The Japanese yen strengthened 0.17 per cent versus the greenback at 108.79 per dollar.

Declining issues outnumbered advancing ones on the NYSE by a 3.39-to-1 ratio; on Nasdaq, a 1.75-to-1 ratio favored decliners. A $1 move in any one of the Dow's 30 components translates to a 6.83-point swing.

AT&T Verizon, Sprint and T-Mobile were all down roughly 0.8 percent.

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