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Broader markets declined on Wednesday following a surge in yield of the 10-year benchmark note after China considered halting purchase of U.S. Treasuries. Markets also suffered losses after reports from Canada surfaced that its government expects Trump to pull out of NAFTA soon. Meanwhile, cost of imported goods in the United States surged to a six year high.
The Dow Jones Industrial Average (DJI) decreased 0.06% to close at 25,369.13. The S&P 500 fell 0.1% to close at 2,748.23. The tech-laden Nasdaq Composite Index closed at 7,136.56, losing 0.1%. The fear-gauge CBOE Volatility Index (VIX) decreased 3.9% to close at 9.69. A total of around 6.93 billion shares were traded on Wednesday, above the last 20-session average of 6.38 billion shares. Decliners outnumbered decliners on the NYSE by a 1.59 -to-1 ratio. On Nasdaq, a 1.09-to-1 ratio favored declining issues.
China Considers Halting Purchase of U.S. Treasuries
A Bloomberg report stated that top government officials in Beijing have advocated reducing or ceasing the purchase of U.S. Treasuries after reviewing China’s foreign-exchange holdings. Such a turn of events comes at a time when central banks globally have hinted at stepping back from buying bonds.
Such reports led the yield on the 10-year benchmark note higher by as much as four basis points to hit an intraday high of almost 2.6% which is also a 9-month high. This had negative ramifications for the U.S. stock market and such an event piqued an average investor’s appetite for risk and market watchers considered rotating out of safer havens to bonds.
Canada SaysTrump Might End NAFTA
Canadian media reported that their government was expecting President Trump to soon announce that the United States was exiting the North American Free Trade Agreement (NAFTA). The report also cited names of two top government officials from Canada who expected this to happen. Such reports weighed on investor sentiment and pulled the broader markets lower in the U.S., Canada as well as Mexico.
On several occasions in the past, Trump had threatened to pull out of the trilateral pact if major changes are not made to NAFTA. Government officials are due to meet for the sixth time from Jan 23 through Jan 28 in Montreal to discuss and negotiate on this issue.
However, such comments just before the meeting have made it increasingly doubtful that any negotiations would take place in the meeting. Shares of General Motors (GM – Free Report) fell as much as 2.4% following such reports. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What are the Benchmarks Doing?
The Dow lost 16.7 points to end in the red, falling as much as 128.81 points in intraday trade.Further, the S&P 500 snapped its six day winning streak to slide 3.1 points and finished in negative territory. Of the 11 major segments of the S&P 500, 10 ended in the red, with real estate leading the decliners.
Financials turned out to be the only sector in the black. The Real Estate Select Sector SPDR (XLRE) lost 1.5% on Wednesday, while Financial Select Sector SPDR ETF (XLF) gained 0.8%. Meanwhile, Nasdaq also snapped its six day streak of gains to lose 10 points.
On the economic data front, the cost of goods which the United States imports surged mildly at the end of 2017 but managed to log a 3% increase —its biggest in six years. Import prices surged a meager 0.1% in December due to an increase in oil prices in the prior month. Meanwhile, export prices fell 0.1% in December, rising 2.6% overall in 2017.
Stocks That Made Headlines
Shares of Sirius XM Holdings (SIRI – Free Report) gained on Jan 10 to close the trading session share, following its better-than-expected performance in 2017 with respect to self-pay subscriber additions. (Read More)
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