Instant View: Stocks slammed, yield curve flattens on trade doubts, growth worries

(Reuters) – U.S. stocks plunged on Tuesday and more points along the Treasury yield curve inverted as doubts arose over a speedy resolution to the U.S.-China trade dispute and over the health of the global economy.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 3, 2018. REUTERS/Brendan McDermid

MARKETS

STOCKS: Dow, S&P and Nasdaq down between 2.3 percent and 2.6 percent

BONDS: 10-year yields US10YT=RR drop below 2.90 percent at one point (latest 2.92); spread vs 2-year notes narrowed to below 10 basis points (latest 11.2)

CURRENCIES: Dollar index .DXY has retraced most of the early-day losses, now little changed on the day

COMMENTS:

DELORES RUBIN, SENIOR EQUITIES TRADER, DEUTSCHE BANK WEALTH MANAGEMENT, NEW YORK:

“This huge move that we are seeing in the last hour, the majority of this is a reaction to Brexit. The selloff that we have seen throughout the day is really about taking a look at the tariff conversation and realizing that nothing has been resolved and that there is still some work to do and some of the euphoria that we felt yesterday was more on the headline than on the substance.”

“Also, just overall that hangover from the Fed conversation last week, where most were assuming that the comments made by the Fed Chair (Jerome) Powell were indicating a slowdown in rate hikes…As we see today with New York Fed President Williams and his comments…that there may have been a misreading of what the Fed may be doing in 2019.”

“You have Brexit, Fed speak and you also have tariff concerns that have come back.”

R.J. GRANT, HEAD OF TRADING, KEEFE, BRUYETTE & WOODS, NEW YORK:

    “We’ve had a huge move in the yield curve. Investors are worried about growth right now. Today is the perfect storm. You’ve nothing really tangible coming out of the G20 summit. You have worries about growth.

    “The rally last week was on hopes we’d get some big agreement. People that ran out and bought stocks yesterday are selling today as we break down.”

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA:

    “Many people are seeing this as less of an agreement and more of a ceasefire and it isn’t very clear on what both sides agreed to other than just a truce.”

    “People are questioning the yield curve inversion as to whether the Fed has gone too far? Is there a recession ahead? And these questions are adding to the worries today.”

    “We have had good growth this year, but it has got to slow down sometime at a more sustainable pace, it’s just a matter of labor market constraints.”

RYAN NAUMAN, MARKET STRATEGIST, INFORMA FINANCIAL INTELLIGENCE, ZEPHYR COVE, NEVADA:

“Right now it’s a bearish sentiment. As soon as investors digested the information from the discussions they focused on the uncertainties and lack of details.”

    “This (yield curve) is an additional negative that investors now have to deal with.”

“It is a risk-off environment because we are seeing those trade-sensitive stocks being sold off first. There is a sell-off in financials due to the flattening of the yield curve because that would significantly impact the earnings power of banks.”

    “It’s more of a defensive play now.”

Americas Economics and Markets Desk; +1-646 223-6300

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