Wall Street and European shares drop, yields jump

by Jonathan Adams
Wall Street

The Dow Jones Industrial Average ended 0.71% lower, at 38,380.12, as the S&P 500 shed 0.32% to 4,942.81 and the Nasdaq Composite dropped 0.20% to 15,597.68

Shares on Wall Street and in Europe dropped on Monday and government bond yields climbed as traders amended their expectations of a near-term U.S. interest rate cut.

Fed Chair Jerome Powell continued to push back against the prospect of near-term rate cuts, in an interview aired on Sunday.

U.S. services sector growth picked up last month and employment rebounded, data showed on Monday. But suppliers seem to fall behind, leaving a measure of input costs at an 11-month high.

Markets could get squeamish as purchasing managers reported a big increase in prices paid, mostly reflecting the rise in shipping costs. However, this rise should be temporary, said Jeffrey Roach, chief economist for LPL Financial.

The Dow Jones Industrial Average (DJIA) ended 0.71% lower, at 38,380.12, as the S&P 500 shed 0.32% to 4,942.81 and the Nasdaq Composite dropped 0.20% to 15,597.68.

MSCI’s broadest index of world shares dropped 0.36%. The pan-European STOXX 600 index closed down 0.1%.

Two-year Treasury yields climbed to a one-month high of 4.483% after Fed chair Jerome Powell said in an interview aired on Sunday that he wanted to wait to be a little more confident that inflation was sustainably dropping before moving interest rates down.

A higher number of companies’ Q4 results missed analyst expectations than historically, said a Goldman Sachs research note on Monday.

Small-cap stocks in Asia plunged as investor sentiment stayed at rock-bottom on a lack of policy support and broad stimulus for China.

The S&P China CSI 1000 small cap stock index dropped more than 6%, closing at a three-year low.

China’s securities regulator vowed to prevent abnormal market fluctuations on Sunday, but announced no specific measures.

China’s blue-chip index ended nearly 0.7% higher after declining 2% earlier in the session and hitting a five-year low last week. Hong Kong’s Hang Seng Index closed nearly 0.2% lower.

State-backed investors have stepped up buying blue-chip funds to support the market in recent weeks, but so far have failed to prevent a slump.

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