November 21, 2017

Markets Flat as Traders Prepare for Fed Moves

Stocks on Wall Street opened little changed on Monday, following the Dow Jones industrial average’s largest weekly drop in more than a year, as traders positioned for an expected move from the Federal Reserve to scale back its economic stimulus.

In early trading the Standard Poor’s 500-share index and the Dow Jones industrial average were flat, and the Nasdaq composite gained 0.2 percent.

Bets that the Fed would begin to wind down its $85 billion-a-month asset purchases were seen in bond markets. The United States benchmark 10-year yield rose to a fresh two-year high of 2.875 percent, and German 10-year government bond yields rose 1.3 basis points to 1.89 percent, briefly hitting a 17-month high of 1.92 percent.

The higher yields could further hurt dividend-paying, low-growth equity sectors like utilities and health care. Last Friday, the S. P. 500 health care sector recorded its largest weekly drop since November 2011.

Capital-intensive industries like large industrials and some mining companies, alongside utilities, could see their stocks fall out of favor if yields and interest rates continue to rise, according to Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

“Anybody with a large amount of short-term debt,” she said, speaking of sectors to watch for a possible sell-off because of higher rates. “And if they pay a dividend, it can be at risk.”

European shares have outperformed over the last two months as the euro zone has pulled out of a recession, but on Monday they were struggling. In early afternoon trading London’s FTSE was down 0.5 percent, the DAX in Frankfurt fell 0.3 percent, and CAC 40 in Paris was 0.8 percent lower.

Rising debt yields in major economies make it harder for developing nations to finance growing current account deficits, and so emerging markets have taken a spill.

The Indian rupee slid as far as 62.73 per dollar Monday, emphatically breaching the previous low of 62.03. The country’s share market lost 1.4 percent, on top of a 4 percent drubbing on Friday.

The country’s central bank has tried to restrict how much Indian residents and companies can send offshore, but that only raised fears of outright capital controls that would further undermine the confidence of foreign investors.

Other Asian markets were mixed. The Nikkei in Japan ended the day up 0.8 percent, while Hong Kong’s Hang Seng was 0. percent lower.

With little expected this week in the way of economic indicators, market participants are focused on the minutes of the latest Fed meeting, expected on Wednesday.

A federal bribery investigation into whether JPMorgan Chase hired the children of key Chinese officials to help it win business is the latest in a series of legal and regulatory headaches for Jamie Dimon, the chief executive.

Article source: http://www.nytimes.com/2013/08/20/business/daily-stock-market-activity.html?partner=rss&emc=rss