Global stocks plummeted for a third consecutive day on Monday as investors took profits from the strong year-end rally in equities. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all fell sharply, with each of the 11 major S&P 500 sectors closing in negative territory.
The recent surge in U.S. Treasury yields has fueled concerns about elevated stock market valuations, prompting investors to re-allocate funds from equities to fixed income. The benchmark 10-year U.S. Treasury yield, which reached its highest level since May 2 at 4.641% last week, fell to 4.543% on Monday.
” Investors did some profit-taking in equities and maybe re-deployed to fixed income,” said Jim Barnes, director of fixed income at Bryn Mawr Trust. “At this point, the bond market is compelling given the recent rise in bond yields over the past weeks.”
The S&P 500 index dropped 1% for the second time this month, marking its first two-day decline since at least 1952. The current cyclical bull market faces a major challenge from rising bond yields, with key levels for the 10-year yield at 4.5%, 4.75%, and 5%.
Investors are also wary of increasing supply as President-elect Donald Trump has promised tax cuts with little in the way of details for restraining government spending. The yield on benchmark U.S. 10-year notes fell 7.6 basis points to 4.543%.
The dollar index edged up 0.07% to 108.06, while the euro and yen declined against the greenback. Oil prices rose slightly, with U.S. crude settling up 0.55% to $70.99 a barrel.
Global markets are affected by the elevated yields, with European stocks also falling due to the German bund yield holding near six-week highs. Trading volumes were muted ahead of the New Year holiday on Wednesday.
The global stock market has rallied this year, with the S&P 500 up about 24% buoyed by growth expectations surrounding artificial intelligence and expected rate cuts from the Fed. However, rising bond yields have sent yields higher, and investors are now taking profits from the strong rally in equities.
Source: https://www.reuters.com/markets/asia/global-markets-wrapup-1-2024-12-30