Stocks notch back-to-back losses as dollar firm on Fed raising rates

PUBLISHED : Wednesday, 08 March, 2017, 7:21am
UPDATED : Wednesday, 08 March, 2017, 7:21am

A gauge of global stock markets slipped on Tuesday as the Dow and S&P 500 notched their first back-to-back losses in more than a month, while expectations the Federal Reserve will raise interest rates supported the US dollar.

Shares of large US pharmaceutical and biotechnology companies sold off after a tweet from U.S. President Donald Trump on the need to lower drug prices. Shares of Pfizer and Amgen each dropped more than 1 per cent.

The dollar rose 0.16 per cent against a basket of six major trading currencies, 0.29 per cent against the British pound and 0.14 per cent against the Swiss franc ahead of the Fed’s meeting next week. Jitters over economic and political developments in Europe also lifted the greenback.

The market is taking in stride expectations the Fed will raise rates, unlike past years, said Rahul Shah, chief executive of Ideal Asset Management in New York.

“As long as we keep getting macroeconomic data that’s supportive of a rate hike we’re going to continue to see stocks rally,” Shah said. “If financials continue to rally with higher rates and industrials rally with better economic data, that could be enough to power the market higher.”

The Dow Jones Industrial Average closed down 29.58 points, or 0.14 per cent, to 20,924.76. The S&P 500 lost 6.92 points, or 0.29 per cent, to 2,368.39 and the Nasdaq Composite dropped 15.25 points, or 0.26 per cent, to 5,833.93.

Stocks in Europe closed slightly lower as weak corporate earnings and the biggest fall in German industrial orders since the depths of the global financial crisis weighed on sentiment.

Europe’s FTSEurofirst index of the 300 leading regional shares fell 0.28 per cent, pulled down by health care and financial stocks.

MSCI’s all-country world stock index dipped 0.22 per cent.

Brent crude settled down 9 cents at US$55.92 a barrel while US West Texas Intermediate (WTI) crude fell 6 cents to settle at US$53.14.

Oil prices slid further in post-settlement trade after data from the American Petroleum Institute showed US crude stocks last week rose 11.6 million barrels, or more than five times analysts’ forecast.

US Treasury yields rose, supporting the dollar, as investors made room for this week’s supply of government debt and also in anticipation of a Fed rate hike this month.

US Treasury yields rose, with the 30-year yield at its highest in more than a month as investors prepared for this week’s supply of coupon-bearing government debt led by US$24 billion of three-year notes. They also rose after data showed the US trade deficit grew in January to its highest monthly level in nearly five years.

US trade deficit with China rises, but slides versus Japan

Investors also reduced their bond holdings in anticipation of a rate increase at the Fed’s policy meeting next week.

Benchmark 10-year Treasury notes fell 7/32 in price to yield just under 2.52 per cent, while the 30-year bond fell 14/32 in price to yield 3.12 per cent after touching its highest since February 3, data showed.

US gold futures for April delivery settled down 0.8 per cent at US$1,216.10 an ounce.