US Bonds, Stocks Plunge Extends Ahead of Data: Markets Wrap

(Bloomberg) -- US stocks and bonds extended their drop as the bearish new-year mood deepened ahead of a swath of data that could show whether aggressive bets on interest-rate cuts this year are justified.

Ten-year Treasury yields rose to %, the highest since mid-December, while the S&P 500 slid . The Nasdaq 100 fell  as investors continued their retreat from tech stocks. The dollar strengthened for a fourth day, the longest run since November. Nvidia Corp. dropped while crypto-tied stocks floundered as Bitcoin erased most of its gains this year.

US markets extended Tuesday’s slump, which registered as the biggest global rout since 1999 for the first full day of trading in a year. Wednesday’s data includes the ISM manufacturing report for December and the JOLTS report of job openings for November, followed by minutes from the Federal Reserve’s last meeting.

Richmond Fed President Thomas Barkin held off on giving a forecast on when the US central bank’s first rate cut would occur. “Conditions are ever evolving,” he said in prepared remarks Wednesday. “So too will our approach. So, buckle up. That’s the proper safety protocol even if you expect a soft landing.”

Read more: Fed’s Barkin Says Soft Landing Looks More Likely, Not Inevitable

The minutes are of particular interest for investors because the December meeting was a key catalyst for the sharp rally in Treasuries, after Fed Chair Jerome Powell said that policymakers had discussed interest-rate cuts.

“We do not expect such sharp cuts to be supported by the discussion in the minutes, but we will be on the lookout for any mention of rate cuts, what would trigger them and how soon they might come,” said Karl Steiner, head of analysis at Skandinaviska Enskilda Banken AB.

Gilts Pullback

In the two-day pullback this year, long-end UK bonds have been among the hardest hit. Yields on 30-year UK government notes have risen 14 basis points, more than their US and German equivalents.

Investors are ditching long-end gilts to free up cash before the UK sells new debt that may have a higher coupon.

In Asia, the MSCI regional benchmark sank 1.2% in the steepest retreat since November as investors sold technology stocks. 

Elsewhere, a slump in Bitcoin on Wednesday saw the cryptocurrency erase almost all gains it had made so far this year. The world’s largest token fell as much as 9.2% to dip below $41,000. The volatility spilled over into crypto-linked stocks, with shares in crypto exchange Coinbase Global Inc. falling more than .

Key events this week:

• US FOMC minutes, ISM Manufacturing, job openings, light vehicle sales, Wednesday
• China Caixin services PMI, Thursday
• Eurozone S&P Global Eurozone Services PMI, Thursday
• US initial jobless claims, ADP employment, Thursday
• Eurozone CPI, PPI, Friday
• US nonfarm payrolls/unemployment, factory orders, ISM services index, Friday
• Richmond Fed President Tom Barkin — an FOMC voter in 2024 — speaks, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.5% as of 9:34 a.m. New York time
• The Nasdaq 100 fell 0.7%
• The Dow Jones Industrial Average fell 0.3%
• The Stoxx Europe 600 fell 1.1%
• The MSCI World index fell 0.8%

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%
• The euro fell 0.2% to $1.0915
• The British pound was little changed at $1.2628
• The Japanese yen fell 1% to 143.34 per dollar

Cryptocurrencies

• Bitcoin fell 6.4% to $42,225.08
• Ether fell 6.8% to $2,205.84

Bonds

• The yield on 10-year Treasuries advanced six basis points to 3.99%
• Germany’s 10-year yield was little changed at 2.06%
• Britain’s 10-year yield advanced two basis points to 3.66%

Commodities

• West Texas Intermediate crude rose 1.6% to $71.52 a barrel
• Spot gold fell 1.1% to $2,035.97 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Joanna Ossinger, Tassia Sipahutar, Pearl Liu, Alice Gledhill and James Hirai.

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