19 April 2024

Dow Poised For Longest Losing Streak Since 2011

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Stocks around the world fell Monday, putting the Dow Jones Industrial Average on track for its longest losing streak since 2011 as doubts about the Trump administration’s ability to push through on campaign promises percolated through global markets.

The Dow Jones Industrial Average declined 166 points, or 0.8%, to 20430, which would mark its eighth consecutive day of declines. The S&P 500 dropped 0.9%, and the Nasdaq Composite fell 1%.

Government bonds, gold, and the yen found favor, while the WSJ Dollar Index was down 0.6%—around November levels—as investors continued to question expectations for business-friendly policies that helped propel stocks to record highs earlier this year.

On Friday, House Republican leaders ultimately abandoned their bill on a health-care plan amid a lack of support, leaving investors fretting about the likely success and party support for other complex legislative efforts, including a tax overhaul and infrastructure spending.

“There is some real concern about whether [President Donald Trump] is going to be able to get these policies through,” said Dianne Lob, managing director for equities at AB. “I think the theme for the year will be uncertainty.”

The move to pull the bill from a vote came shortly before U.S. markets closed Friday, leaving little time to react that day, but Wall Street still posted its steepest weekly decline in months as investors headed toward the end of an otherwise buoyant first quarter.

On Monday, the CBOE Volatility Index, known as Wall Street’s “fear gauge”, hovered around its highest level this year. Banks, miners, industrials, and oil companies—among the best performers after the election—led losses in Europe, Asia and in U.S. premarket trading, tracking a decline in government bond yields and commodity prices.

The Stoxx Europe 600 was down 0.8%, while London’s FTSE 100 fell 0.9% and Germany’s DAX fell 1% as a weaker dollar also put pressure on shares of exporters. The British pound was last up 1.1% at $1.2606, while the euro was up 0.9% at $1.0892, around its highest since December, as Germany’s Ifo business sentiment index hit its highest since July 2011.

Short positions on the euro more than halved last week to their lowest level since 2014, according to Rabobank analysis of CFTC data.

The dollar had initially rallied after Mr. Trump’s election on the expectation that pro-growth policies, particularly tax cuts and deregulation of the financial sector, would boost the economy and prompt the Federal Reserve to raise interest rates faster than previously anticipated.

Those trades have been fading in recent weeks however, with the dollar down more than 3% so far this year, and the Mexican peso, which initially fell sharply on Mr. Trump’s election, up over 10%.

“The Trump-related euphoria has now been almost completely priced out of the currency market,” said Vasileios Gkionakis, currency strategist at UniCredit Research.

As investors returned to assets perceived as safer, yields on 10-year Treasury notes fell to 2.358% from 2.396% on Friday, while their German counterparts fell to 0.382% from 0.429%. Yields move inversely to prices.

Commodity prices declined as investors shed a host of so-called risk assets. Oil, which had started the day higher, turned modestly lower despite the dollar’s decline. Brent crude oil dropped 0.7% to $50.55 a barrel.

Base metals fell across the board, with copper futures down 1.8% at $5,708 a ton. Metals prices also faced pressure following curbs on financing in China’s housing sector, with iron-ore futures down sharply on the Dalian Commodity Exchange.

Gold, which tends to outperform in times of market stress, climbed 0.8% to $1,258.30 an ounce to around a one-month high, while the dollar fell 1% against the yen to ¥110.1840.

“Markets are questioning the high expectations built over the past few months,” said Jeremy Gatto, investment manager at Unigestion. “[Mr. Trump] did promise a phenomenal tax reform package, and the market would be disappointed if we got something smaller than expected or nothing at all.”

Still, he said, he remains quite positive on equity markets for now, citing a strengthening global economy and a lack of alternatives to stocks.

Earlier, Japan’s Nikkei Stock Average dropped 1.4% to its lowest levels since early February as the yen strengthened. Infrastructure stocks, which rose in anticipation of a Trump-driven increase in spending, were among Monday’s largest decliners in Japan, while shares of insurers who invest heavily in government bonds also came under pressure.

Most other stock markets in Asia logged modest declines, with indexes in Hong Kong down 0.7% and shares in Shanghai and Australia down 0.1%.

Click here for the original article from Wall Street Journal.

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