Stephen Culp
NEW YORK (Reuters) – Wall Street edged lower as U.S. Treasury yields rose as rising tensions in the Middle East helped curb investors’ risk appetite.
The three major U.S. stock indexes reversed initial gains to extend Friday’s selloff, while the yen fell to its lowest level since 1990, reviving fears of intervention.
US retail sales data for March beat analysts’ expectations, providing the latest evidence of US consumer resilience but also suggesting the US Federal Reserve may delay its rate cut longer than previously thought.
“Market expectations have dropped from three expected rate cuts this year to fewer than two,” said Bill Mertz, head of capital markets research at U.S. Bank Wealth Management in Minneapolis. “This is the concern that markets are feeling as the stock rally has stalled in recent weeks.”
On the geopolitical front, Iran launched a missile and drone attack on Israel over the weekend in retaliation for an alleged attack on its embassy, and calls for restraint on Israel’s response appear to be easing tensions in the region.
“I would say that the level of uncertainty in the geopolitical arena is higher than a week ago, and it is understandable to see higher market volatility in the current environment,” Merz added.
It fell 282.93 points, or 0.74%, to 37,700.31, lost 61.94 points, or 1.21%, to 5,061.47 and fell 277.99 points, or 1.72%, to 15,897 ,10.
European shares ended modestly higher as weak energy stocks capped gains in industrials, while investors kept a wary eye on developments in the Middle East.
The pan-European index rose 0.13%, while the MSCI index of shares across the world fell 1.01%.
Emerging market stocks lost 1.15%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.09% lower, losing 0.74%.
Yields on 10-year U.S. Treasury notes rose to their highest level since November after a strong retail sales report showed the Fed could keep its key rate in restrictive territory longer than expected.
Benchmark 10-year bonds were last down 31/32 to yield 4.626% from 4.499% late Friday.
The 30-year note was last down 66/32 at 4.7385% from 4.603% late Friday.
The dollar rose against a basket of global currencies, building on last week’s five-month high as the yen fell to a 34-year low.
The yen’s move helped revive expectations that Japanese authorities might intervene.
The rate rose by 0.14%, the euro fell by 0.17% to $1.0624.
The Japanese yen weakened 0.58% against the greenback at 154.21 per dollar, while sterling last traded at $1.2441, down 0.07% on the day.
Crude oil prices fell and then sharply pared their losses as investors weighed supply risks arising from geopolitical turmoil.
fell 0.29% to settle at $85.41 per barrel, after settling at $90.10 per barrel, down 0.39% on the day.
Gold rose more than 1% as the safe-haven metal extended its rally after hitting an all-time high in the previous session.
added 1.2% to $2,372.39 per ounce.