World stocks declined in their biggest two-day dive in almost six months yesterday as tumbling oil prices and a jump in global borrowing costs cooled the year’s euphoric start in markets.
Lackluster German inflation curbed a rise in US Treasury yields – the benchmark for world lending rates – after they touched their strongest level in nearly four years overnight at 2.733 per cent.
Wall Street stocks shed almost one per cent, led by a decline in energy shares amid ongoing evidence of rising US crude output.
A plunge in healthcare-related companies pulled stocks lower after Amazon.com, Berkshire Hathaway and JPMorgan said they plan to form a venture to cut costs for their US employees.
The S&P energy sector fell 1.77 per cent, and healthcare tumbled 1.55 per cent, the second-biggest decline among the 11 major sectors. Health insurer UnitedHealth and drugmaker Pfizer were among the top five decliners in the S&P 500, falling 3.3 per cent and 2.6 per cent, respectively.
Pfizer had risen about two per cent in pre-market trading after the company’s reported quarterly results and full-year forecasts beat expectations.
Investors initially were spooked by the two-day decline on Wall Street, which prompted a flight to the safety of US government bonds, said Gennadiy Goldberg, interest rates strategist, at TD Securities in New York.
But the Treasury price rally tapered off as investors readied for President Donald Trump’s first State of the Union address to Congress later yesterday, a Federal Reserve statement today and a jobs report on Friday that will serve as a barometer for the American economy.
The Fed will be watched for comments that could quicken expected interest rate hikes this year, as the inflation outlook has firmed in recent readings.
“Investors are getting a bit worried about inflation, which has led some people to believe that the Fed might be more aggressive when it comes to raising rates,” said Robert Pavlik, chief investment strategist at SlateStone Wealth. “Despite this selloff, all indications point to a firming economy, and I do expect to see some bargain hunters step in soon,” Mr Pavlik said.
The Dow Jones fell 294.98 points, 1.12 per cent, to 26,144.5. The S&P 500 lost 24.69 points, 0.87 per cent, to 2,828.84 and the Nasdaq Composite dropped 49.97 points, 0.67 per cent, to 7,416.54.
The Pan-European FTSEuro-first 300 lost 0.73 per cent, and MSCI’s gauge of stocks across the globe shed 0.86 per cent. Benchmark 10-year notes fell 4/32 in price to yield 2.7142 per cent.
The dollar reversed Monday’s gains. After six weeks of declines, the index looked to fall about 3.4 per cent for the month, its biggest fall since March 2016.