U.S. Stocks Dip as Investors Turn to Tax Overhaul: Markets Wrap

By Bloomberg / January 01, 1970 / in.investing.com / Article Link

(Bloomberg) -- U.S. equities turned lower with the dollar as investors try to assess the tax overhaul package with leaders in the Senate and House of Representatives aiming to finalize compromise legislation and hold floor votes next week. The euro retreated with the European Central Bank remaining cautious about the prospects of reaching its inflation goals.

The S&P 500 Index climbed at the open but then reversed direction, while the tech-heavy Nasdaq Composite Index fell following the U.S. Federal Communications Commission’s decision to sweep aside internet neutrality rules. Yields on 10-year Treasuries gained amid continued optimism about the economy’s strength after U.S. retail sales topped estimates. Oil rose to near $57 a barrel.

The retail figures signaled a broad strengthening of consumer demand as the holiday shopping season got under way, bolstering optimism in the world’s largest economy. The Fed on Wednesday said the labor market was tightening but it still didn’t see inflation accelerating, a sentiment echoed Thursday by the ECB.

“With broad-based gains across a number of key categories, U.S. retailers are already feeling a bit more cheer this holiday season,” Lindsey Piegza, chief economist at Stifel Nicolaus & Co., wrote in an email. “The consumer appears to have double downed on their optimism for fiscal reform translating into more cash in their pockets next year to supplement the rise in spending absent meaningful income growth.”

Meanwhile, in comments after Europe’s central bank kept rates steady, President Mario Draghi stopped short of declaring that the lender will meet its inflation goal in 2020, signaling that the euro-area economy isn’t yet strong enough to warrant cutting monetary stimulus.

“For the ECB, the big question is what is their next steps once tapering is done?” said Alex Dryden, a London-based market strategist at JPMorgan (NYSE:JPM) Asset Management. “The most important central bank to be watching in 2018 is the ECB. They are the ones with some of the biggest question marks over their heads, there’s a lot of clarity that is needed on what will be happening there.”

Elsewhere, the pound slipped after the Bank of England kept interest rates unchanged. Turkey’s lira fell after its central bank raised a key rate less than investors expected. Gold rose with crude, which reversed Wednesday’s declines.

Terminal customers can read more in our Markets Live blog.

Here are some of the key events scheduled for this week:

European lawmakers continue to debate Brexit and weigh moves on the next step, while North America Free Trade Agreement negotiators meet again.

And these are the main moves in markets:

Stocks

The S&P 500 was down 0.1 percent at 1:54 p.m. in New York, while the Nasdaq Composite slid 0.1 percent after rising as much as 0.4 percent earlier in the session.The Stoxx Europe 600 Index declined 0.5 percent.The MSCI All-Country World Index was little changed.The U.K.’s FTSE 100 Index fell 0.7 percent, the largest retreat in two weeks.

Currencies

The Bloomberg Dollar Spot Index gave up earlier gains and was down less than 0.1 percent.The euro decreased 0.3 percent to $1.1796.The British pound rose 0.1 percent to $1.3439.The Japanese yen added 0.3 percent to 112.22 per dollar.

Bonds

The yield on 10-year Treasuries climbed one basis point to 2.3529 percent.Britain’s 10-year yield declined four basis points to 1.174 percent, the lowest in three months.Germany’s 10-year yield was little changed at 0.316 percent.France’s 10-year yield fell one basis point to 0.644 percent.

Commodities

West Texas Intermediate crude added 0.7 percent to $56.98 a barrel.Gold decreased less than 0.1 percent to $1,254.50 an ounce.Copper rose 0.7 percent to $3.07 a pound.

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