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United States stock markets retreat on Tuesday
| 06/26/2019
- Jerome Powell issues warning of downside risk
- Government downplays likelihood of a trade deal with China being sealed before G20
- NASDAQ 100 down 1.7%, S&P 500 drops 0.95%, MSCI Indexes also lower
Stock markets in the United States recorded their biggest losses in well over three weeks yesterday after Fed Chairman Jerome Powell cautioned against an increased downside risk to the country’s economy. At the same time, the Trump government hinted that it was unlikely that a US-China trade deal would be signed at the G20 meeting.
This caused the dollar and treasuries to strengthen.
The S&P 500 traded lower for the third day in a row as Powell again argued the case for an interest rate reduction. Markets seem to have priced in a drop of nearly 50 basis points next month, although St. Louis Fed President James Bullard believes that is too much.
Technology stocks dropped the most, with the NASDAQ 100 losing 1.7% after a senior official in the Trump government said no detailed trade agreement was expected during the G20 summit.
The S&P 500 lost 0.95%, while the Stoxx Europe 600 slipped 0.1%. There was a 0.8% drop in the MSCI Emerging Market Index, and the MSCI Asia Pacific Index lost 0.4%.
Returns on 10-year Treasury notes dropped below 2% for the first time in three years.
With the White House seemingly downplaying any hope of a breakthrough in trade negotiations with China, investors began to shun higher risk assets after the recent rally. The market was betting on substantial rate cuts this year, and comments by Trump officials yesterday led to renewed doubts.
According to Charles Schwab Investment Management CIO Omar Aguilar, the markets are nevertheless currently still driven by expectations of lower interest rates starting next month.
Drug manufacturer Allergan’s stock price spiked after it agreed to an acquisition by AbbVie Inc. Bitcoin extended its bull run to above $11,000, and West Texas oil traded lower despite increased tensions between Iran and the US. The possibility of OPEC further reducing production failed to cause an increase in prices.