Financial, tech stocks lead Wall Street lower as yields rise
April 25, 2018
US STOCKS-Wall St set to open lower as oil prices slump
April 25, 2018Canada’s main index opened lower on Wednesday, weighed down by energy stocks and worries over rising U.S. yields.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index fell 11.42 points, or 0.07 per cent, to 15,465.58.
The Canadian dollar weakened to a three-week low against its U.S. counterpart on Wednesday as oil and stock prices fell, while the greenback added to recent gains against a basket of major currencies.
The U.S. dollar notched a four-month high, boosted by a rise in benchmark U.S. Treasury yields above 3 per cent.
Investors worry that increased borrowing costs could slow global growth, denting prospects for stocks and commodity-linked currencies such as the Canadian dollar.
The price of oil, one of Canada’s major exports, fell as rising U.S. fuel inventories and production weighed on an otherwise bullish market.
U.S. crude prices were down 0.2 per cent at $67.59 a barrel.
The Canadian dollar was trading 0.3 per cent lower at $1.2878 to the greenback, or 77.65 U.S. cents. The currency touched its weakest level since April 3 at $1.2897.
The loonie has declined 2.5 per cent since the Bank of Canada last week held its benchmark interest rate steady at 1.25 per cent and said it did not know when or how aggressive it would need to be to keep inflation in check.
Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins are due to appear before the Senate Standing Committee on Banking, Trade and Commerce at 4:15 p.m. ET.
The Dow opened slightly higher on Wednesday, boosted by Boeing’s 3.4-per-cent jump after strong results, while the Nasdaq and S&P 500 were little changed as U.S. bond yields climbed above the 3-per-cent level.
The Dow Jones Industrial Average rose 46.07 points, or 0.19 per cent, at the open to 24,070.20. The S&P 500 opened higher by 0.36 points, or 0.01 per cent, at 2,634.92. The Nasdaq Composite gained 2.64 points, or 0.04 per cent, to 7,009.99 at the opening bell.
Boeing, the world’s biggest planemaker, rose after it reported a higher-than-expected quarterly profit and raised its full-year forecast for earnings and cash flow.
The yield on 10-year U.S. Treasury notes, the benchmark for global interest rates, held above 3 percent after crossing the level for the first time in four years on Tuesday, stoking concerns about higher borrowing rates for companies.
Alphabet’s shares fell after the company said it expected a surge in costs on Monday, while Caterpillar noted first-quarter earnings would be the “high water mark” for the year and warned of higher material costs.
Investors are watchful about other companies raising such warnings, as inflation is picking up and the Federal Reserve is in no mood to put the brakes on its own rate-hike program.
“The markets are reacting to yields moving higher,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “The new trading range will continue to cap equities from positively responding to good earnings news.”
Reuters data shows that analysts are now estimating 21.1-per-cent profit growth in the first quarter among the S&P 500 companies, compared with 18.6-per-cent growth rate at the start of the earnings season.
Falls in Asia’s and then Europe’s main bourses pushed the 47-country MSCI world share index down for a fifth day running to its lowest level for more than two weeks.
Tech-heavy Taiwan shares had hit two-month lows as worries about a slowdown in gadget demand spread, while oil firms also eased as crude prices came off 3-1/2 year highs.
Euro zone bond yields – yields are a proxy of borrowing costs – were dragged up in the slipstream of the U.S. moves though Thursday’s looming European Central Bank (ECB) meeting ensured there was a touch of caution.
Markets want to know when the ECB plans to wind down its 2.55-trillion-euro stimulus programme. One of its policymakers, France’s Francois Villeroy de Galhau, said on Tuesday the weaker run of recent economic data was expected to pass.
