U.S. stocks fell the most since Donald Trump’s election as the reflation trades that bolstered the dollar and Treasury yields faltered amid growing concern pro-growth policies won’t sail through Congress. Crude slumped through $48 a barrel.
The S&P 500 index sank more than 1 percent for the first time since Oct. 11, with the selloff deepening in the final 30 minutes of trading after Reuters reported North Korea would pursue accelerating its nuclear program. Banks led the rout throughout the day, tumbling the most since June as Treasury yields tumbled and Morgan Stanley warned its fixed-income trading won’t pick up.
Industrial and material shares slumped as House Republicans warned failure to pass a health-care bill on Thursday could imperil tax and spending reforms. Oil resumed a slide as U.S. crude stockpiles are forecast to increase. Gold topped $1,240 an ounce on haven demand.
Trump met with House Republicans Tuesday morning to rally support for the repeal of Obamacare as investors look for signs that his plans to cut corporate taxes and boost spending will move forward. Fed Bank of Minneapolis President Neel Kashkari repeated Tuesday his opposition to the Fed’s latest rate hike and argued the central bank shouldn’t rush to tighten with signs of inflation remaining subdued.
“With the health-care morass, the Trump effect is taking a little bit of a backseat in peoples’ minds,” said Steve Sosnick, an equity risk manager at Timber Hill, the market-making unit of Greenwich, Connecticut-based Interactive Brokers Group. “It feels like the market needs another catalyst. The catalysts had been coming largely from the Fed and the Trump effect. Something is spooking people.”
What’s coming up this week:
–There’s a steady lineup of Fed speakers this week, headlined by Janet Yellen on March 23, while central bank policy decisions are expected in New Zealand, the Philippines and Sri Lanka.
–The House of Representatives votes Thursday on the repeal of the Affordable Care Act.
–March PMI for France is due Friday, along with final fourth-quarter GDP figures.
Here are the main moves in markets:
–The S&P 500 fell 1.2 percent to 2,343.98 as of 4 p.m. in New York, the biggest drop since September and the lowest level in a month. The index hadn’t fallen 1 percent in any session for 109 straight days.
–Banks sank 2.9 percent for the steepest slide since June 24, the day after the U.K. vote to leave the European Union.
–The Stoxx Europe 600 Index fell 0.5 percent. Mining stocks tumbled as the British pound strengthened.
–The MSCI Emerging Market index halted a seven-day advance that was the longest rally since August.
–The Bloomberg Dollar Spot index slipped by 0.3 percent, following a 0.1 percent drop Tuesday.
–The euro was up by 0.7 percent at $1.0812, rising versus all of its G-10 peers except sterling.
–The British pound traded 1 percent higher to $1.2487 after U.K. inflation accelerated more than forecast to break through the Bank of England’s target for the first time since 2013.
–The yield on 10-year Treasury notes fell three basis points to 2.43 percent after earlier rising by four basis points. The rate is down 11 basis points in the past three sessions.
–The U.S. bond rally pushed the yield advantage on 10-year U.S. Treasuries over German debt to the narrowest level in more than four months.
–The yield on 10-year German government bonds rose two basis points to 0.46 percent.
–West Texas Intermediate oil fell 1.8 percent to settle at $47.34 before U.S. inventory data on Wednesday and as Libya prepared to restart crude shipments from major ports.
–Copper slumped 1.8 percent to finish at $5,776 a metric ton in London, amid signs supplies are returning. Disruptions caused the metal to surge last month to the highest level since 2015.
–Gold dropped 0.1 percent to $1,233.68 an ounce, after four days of gains.
(c) 2017, Bloomberg News · Jeremy Herron, Joseph Ciolli