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S&P 500, world equity index retreat as economic worries weigh

EconomySep 07, 2021 04:52PM ET
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2/2 © Reuters. FILE PHOTO: People are reflected on an electric board showing Nikkei index and its graph outside a brokerage at a business district in Tokyo, Japan, June 21, 2021. REUTERS/Kim Kyung-Hoon 2/2

By Chris Prentice and Danilo Masoni

WASHINGTON/MILAN (Reuters) -U.S. shares were mixed and global equities retreated from record highs on Tuesday as investors balanced mounting worries over the slowing pace of economic recovery and hopes the Federal Reserve will delay tapering its bond purchases.

Unofficially, the Dow Jones Industrial Average fell 0.76% to end at 35,100 points, while the S&P 500 lost 0.34% to 4,520.03. The Nasdaq Composite climbed 0.07% to 15,374.33, as Apple Inc (NASDAQ:AAPL) and Netflix Inc (NASDAQ:NFLX) both hit record highs.

The MSCI world equity index retreated from a an all-time high overnight, following seven consecutive days of gains to all-time highs. Earlier in the session, hopes of extra stimulus in Japan and strong China trade data had boosted Asia shares.

"The combination of exorbitant expectations, nosebleed valuations and slowing macro environment make the go-forward reward/risk outlook less attractive," said Jeffrey Carbone, managing director at Cornerstone Wealth in Huntersville, North Carolina.

European stocks retraced ahead of an ECB policy meeting on Thursday. The STOXX 600 benchmark fell 0.5% but was not far from last month's lifetime peak.

Data on Friday showed the U.S. economy created 235,000 jobs in August, the fewest in seven months as hiring in the leisure and hospitality sectors stalled, reducing expectations that the Fed will opt for an early tapering of its monthly bond purchases.

The market took the surprisingly soft U.S. payrolls report on Friday "in stride, with the assumption that the COVID-19 Delta variant had an impact on economic activity in August," Arthur Hogan, chief market strategist at brokerage National Holdings in New York, said in a market note.

Speeches by a number of U.S. policymakers later this week will be closely watched for any indication about how the weak jobs report has impacted the Fed's plans on tapering its bond purchases and keeping its expansive policy for the near-term.

The recent equity rally started after Fed Chair Jerome Powell's dovish speech at the Jackson Hole Symposium in August.

"Given that before Jackson Hole many FOMC members had come out in favor of tapering on a tight timetable, we'll see if they confirm, or align with Powell's more moderate message," said Giuseppe Sersale, fund manager at Anthilia.

U.S. government bond yields rose on Tuesday, continuing the climb seen on Friday in the wake of the jobs report and ahead of a fairly busy week of Treasury auctions. [US/]

Japanese shares rallied further on hopes the ruling Liberal Democratic Party will offer additional economic stimulus and easily win an upcoming general election after Prime Minister Yoshihide Suga said he would quit.

Tokyo's Nikkei crossed the 30,000 mark for the first time since April, also helped by an announcement on its reshuffle, and the broader Topix index climbed 1.1% to a 31-year high.

Anthilia's Sersale said investors had a defensive positioning on Japanese stocks that led to a short squeeze.

"I was positive on Tokyo (stocks) and remain so, but perhaps at this point it is better to look for a less overbought entry point," he said.

Mainland Chinese shares extended gains, with the Shanghai Composite rising 1.5% to its highest level since February, helped by Chinese trade data showing both exports and imports grew much more quickly than expected in August.

A rout in bonds and shares of China Evergrande Group deepened on Tuesday after new credit downgrades on the country's No. 2 developer.

The euro retreated 0.24%, while Europe's broad FTSEurofirst 300 index dropped 0.46%.

The ECB is seen debating a cut in stimulus, with analysts expecting purchases under its Pandemic Emergency Purchase Programme (PEPP) to fall, possibly as low as 60 billion euros a month from the current 80 billion euros.

Germany's 10-year yield hit its highest level since mid-July.

The Australian dollar briefly rose after the central bank went ahead with its planned tapering of bond purchases, but quickly gave up those gains after the bank reiterated its need to see sustainably higher inflation to raise interest rates.

The Aussie was down 0.7%, off its 1-1/2-month high set on Friday.

The U.S. dollar rose 0.4% against a basket of other major currencies, pressuring gold prices. Spot bullion prices were down 1.6% by 4:10 p.m. EDT (2010 GMT). U.S. gold futures settled 1.9% lower at $1,798.5 an ounce. [GOL/]

Elsewhere in commodities, oil prices slid on concerns over weak demand in the United States and Asia. Saudi Arabia's sharp cuts to crude contract prices for Asia had earlier revived demand concerns. [O/R]

U.S. West Texas Intermediate crude settled down 94 cents or 1.4% from Friday's close at $68.35 a barrel, and touched a session low of $67.64.

Brent crude futures settled down 53 cents, or 0.7%, a $71.69 a barrel, after falling 39 cents on Monday.

S&P 500, world equity index retreat as economic worries weigh
 

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Comments (14)
perplexed76 .
perplexed76 . Sep 07, 2021 11:24PM ET
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economic worries great for gambling markets
Jon Bal
Jon Bal Sep 07, 2021 3:17PM ET
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yep.  nothing says blood in the streets like -0.24%
Ricky Singh
Ricky Singh Sep 07, 2021 11:37AM ET
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Manipulators at their very best !
taylor jason
taylor jason Sep 07, 2021 10:35AM ET
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sp500 has rallied 1000 points since the last correction. everyone knows a correct is imminent whether it's in the 4th qtr or 1st qtr. one thing is certain when the correction does arrive it will be swift and violent.
Pezhman Parsi
Pezh Sep 07, 2021 10:35AM ET
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We going to have a new ATH on Friday. This is a small down before they buy the dip again.
Antonio Velardo
Antonio Velardo Sep 07, 2021 9:44AM ET
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I wonder how many here have shorted the market and for how long.
taylor jason
taylor jason Sep 07, 2021 9:44AM ET
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smart money remains net long while maintaining appropriate hedges.
Francesco Lucchesi
Francesco Lucchesi Sep 07, 2021 9:44AM ET
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taylor jason "smart money" lol.
Paul Richard
Paul Richard Sep 07, 2021 9:44AM ET
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yeah, most posters on here are losing big, look at the same comments every day. they claim to know why the market goes up yet they are not happy when it does.
Rul Buz
Rul Buz Sep 07, 2021 3:40AM ET
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Market been in a rally for ages and the reason is dovish fed bets this is nonsense.
Darrell Peterson
Darrell Peterson Sep 07, 2021 1:55AM ET
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there will be a lot of finger pointing when this thing tanks .
Ricardo Diogo
Rcd72 Sep 07, 2021 1:47AM ET
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FED behavior is nonsense, the inflation worldwide is a criminal case
taylor jason
taylor jason Sep 07, 2021 1:47AM ET
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the fed does not mandate monetary policy for countries outside the US. not sure how you can say fed is responsible for inflation in countries other then the us
Bo Davidoff
Bo Davidoff Sep 07, 2021 1:47AM ET
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taylor jason  , do you really believe this ? They managed to bribe Gorbatchev what is left for cheap Lagard or Draghi.
Bo Davidoff
Bo Davidoff Sep 07, 2021 1:47AM ET
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At least in puppet Europe it is the FED who takes the decisions. This is not hard to see
Jokers R Us
Jokers R Us Sep 07, 2021 1:47AM ET
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taylor jason  because we are the worlds reserve currency. Do you know how economics works?
Michael Angelo
Michael Angelo Sep 07, 2021 1:09AM ET
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There's nothing special other than the title. Very clear the market as a whole is floating around high numbers because there are no big sellers. Seen this before, has no clear direction. A sismique event is coming.
Shivam Dave
Shivam Dave Sep 06, 2021 11:32PM ET
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It's so unfortunate that current generation have to depend on high risk assets for their retirement due to artificially low rates.
Joel Schwartz
Joel Schwartz Sep 06, 2021 11:29PM ET
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When the marker moves on central bank printing instead of fundamentals, it’s doomed to fail. Look at an all time chart for US CPI & PPI.
Craig Garrett
Craig Garrett Sep 06, 2021 11:24PM ET
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I think the market has sniffed out the fact that the Fed will never taper. If anything, the Fed will realize they are going to have to print even more money every month.
taylor jason
taylor jason Sep 06, 2021 11:24PM ET
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fed will 100% taper, my guess by EOY
Mike Harms
Mike Harms Sep 06, 2021 10:48PM ET
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MANipulated Casino ... where's the Financial Science?Greater Fool Theory = Momentary-MOMENTum!
Brandon Wooton
Brandon Wooton Sep 06, 2021 10:36PM ET
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finally a title that represents the honest truth.
 
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