BNN Bloomberg's mid-morning market update: May 19, 2021
U.S. stocks closed mixed and Treasury yields rose as minutes showed Federal Reserve officials were cautiously optimistic about the U.S. recovery at their April meeting, with some signaling they’d be open “at some point” to discussing scaling back the central bank’s massive bond purchases.
The S&P 500 fell for a third day, and 10-year Treasury yields jumped to session highs following the release. Energy and raw-material stocks fell the most as commodities prices tumbled amid mounting concern about inflation and potential curbs on monetary stimulus. The Nasdaq 100 notched a small advance, boosted by late-day gains in tech stocks including Facebook Inc. and Alphabet Inc.
“We saw 10-year yields rise pretty sharply, clearly an upward move after the minutes were released -- it looks like it all comes down to minor changes in wording on tapering,” said Collin Martin, fixed-income strategist at Schwab Center for Financial Research. “There might be a few participants who are getting a little eager to start the discussion, which might be more than the markets were expecting. For anyone waiting for the taper, this could be a hint it’s coming sooner rather than later.”
Cryptocurrency-exposed shares including Coinbase Global Inc., Marathon Digital Holdings Inc. and Riot Blockchain Inc. each fell more than 5 per cent after Bitcoin touched its lowest level since January before bouncing back. Tesla Inc. fell to a two-month low after data showed a slowdown in China sales. Target Corp. rallied to a record high after predicting a more profitable year as quarterly sales soared.
At its worst moment, Bitcoin dropped about 30 per cent to within a whisker of US$30,000. It pared that decline to about 8 per cent by 4 p.m. New York time. Other cryptocurrencies held double-digit percentage losses, pressured in part by a Tuesday statement from the People’s Bank of China reiterating that digital tokens can’t be used as a form of payment.
“Tactically, it seems a bit overdone as fundamentals have changed modestly,” Mike Bailey, director of research at FBB Capital Partners, said of the crypto rout. “However, this type of volatility is a reminder that the asset class is pure. This type of move could flush out some of the casual crypto investors, since we haven’t seen this type of downward volatility in some time.”
Stocks have lost steam in recent sessions, with pricier sectors such as technology tumbling on worries about inflation and a COVID-19 resurgence in some countries. While policymakers have signaled they intend to maintain an accommodative stance for some time to come, traders will parse the Fed’s minutes for clues about the outlook. The Bloomberg Commodity Index, which touched a nine-year high last week, fell for a second day as oil, copper, soybeans and almost every other futures contract linked to industrial and agricultural staples retreated.
Here are some key events this week:
- IMF Managing Director Kristalina Georgieva and ECB President Christine Lagarde speak at the Vienna Economic Dialogue Thursday
- Euro-area finance ministers and central bank chiefs hold an informal meeting. A larger group of EU finance ministers and central bank chiefs will meet May 22
These are some of the main moves in markets:
- The S&P 500 fell 0.3 per cent as of 4:04 p.m. New York time
- The Nasdaq 100 rose 0.2 per cent
- The Dow Jones Industrial Average fell 0.5 per cent
- The MSCI World index fell 0.7 per cent
- The Bloomberg Dollar Spot Index rose 0.5 per cent
- The euro fell 0.4 per cent to US$1.2176
- The British pound fell 0.5 per cent to US$1.4118
- The Japanese yen fell 0.3 per cent to 109.22 per dollar
- The yield on 10-year Treasuries advanced four basis points to 1.68 per cent
- Germany’s 10-year yield was little changed at -0.11 per cent
- Britain’s 10-year yield declined two basis points to 0.85 per cent
- West Texas Intermediate crude fell 3.1 per cent to US$63 a barrel
- Gold futures rose 0.2 per cent to US$1,871 an ounce