Wall Street ends week hounded by geopolitical worries and Trump saying dollar too strong
Wall Street indexes fell along with US Treasury yields on Thursday on safe-haven demand spurred by geopolitical worries, and the US dollar rebounded after a sell-off following remarks by President Donald Trump on Wednesday which was seen as an overreaction.
Financial stocks were the biggest drag on the S&P 500, hurt by moves in Treasuries and as bank quarterly results showed weak loan growth.
US Treasury benchmark yields hit near five-month lows as Trump’s comments saying he favoured low interest rates intensified a bond market rally, which was underpinned by worries about potential US military strikes against Syria and North Korea.
Early afternoon news that a massive US bomb was dropped in eastern Afghanistan added to uncertainty.
Kate Warne, principal investment strategist at Edward Jones in St. Louis, said the dip in bond yields put pressure on stocks ahead of a holiday weekend in the United States.
“What we’ve seen is investors from the rest of the world putting more money in US Treasuries” due to geopolitical concerns, Warne said.
The Dow Jones Industrial Average fell 138.61 points, or 0.67 per cent, to 20,453.25, the S&P 500 lost 15.97 points, or 0.68 per cent, to 2,328.96, and the Nasdaq Composite dropped 31.01 points, or 0.53 per cent, to 5,805.15.
The S&P was down more than 1 per cent for the week. The energy sector was the index’s biggest percentage decliner, led by weakness in Chevron and Exxon Mobil.
The dollar index, which tracks the greenback against a basket of six trade-weighted peers, was up 0.5 per cent, following a 0.6 per cent decline on Wednesday that was the biggest fall in three weeks. After hitting a five-month low against the yen at 108.73 yen in Asian trading, the dollar steadied at 109.10 yen.
The US dollar tumbled on Wednesday after Trump told The Wall Street Journal that the greenback was “getting too strong” and would eventually hurt the US economy.
“Clearly, I think (the dollar) was oversold yesterday,” said Peter Ng, senior currency trader at Silicon Valley Bank in Santa Clara, California. “The market was very sensitive to headlines given how nervous it has become due to geopolitical risk.”
The yield on 10-year Treasury notes fell 14 basis points, for the biggest weekly decline since January 2016, while the gap between two-year and 10-year yields contracted to under 103 basis points, the tightest since November 9 after Trump’s presidential win.
The MSCI all-world stock index was down 0.5 per cent, well below its session high, ending a second week of declines.
In commodities, oil prices were little changed on modest trading volume in a week in which crude benchmarks recouped more of March’s losses on increased hopes world supply and demand were nearing balance. US crude ended up 0.13 per cent at US$53.18 a barrel, while global benchmark Brent settled up 0.05 per cent at US$55.89.
Gold was up 0.07 per cent at US$1,286.95 an ounce after hitting a five-month high earlier in the session.