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Wednesday, May 6, 2015

Wall Street ends lower on global bond rout, Yellen warning

US stocks ended weaker today after US Federal Reserve Chair Janet Yellen warned of high valuations, adding to anxiety about future interest rates and a global bond rout.

The S&P 500 ended at a low not seen since early April after Yellen said high equity valuations could pose dangers, although she also said she does not see any bubbles forming.

Atlanta Federal Reserve bank president Dennis Lockhart said he still expects it will be appropriate to raise interest rates some time in the middle of the year, and that market expectations of a September increase were in "reasonable alignment" with the central bank's likely path.

His and Yellen's comments came as investors try to pinpoint when the Fed will begin raising interest rates for the first time since 2006. An April payroll report later this week may affect when the Fed will make its move.

Cutting losses of more than 1 percent in afternoon trade, the Dow Jones industrial average fell 86.22 points, or 0.48 percent, to 17,841.98, the S&P 500 lost 9.31 points, or 0.45 percent, to 2,080.15 and the Nasdaq Composite dropped 19.68 points, or 0.4 percent, to 4,919.64.

Yellen's comments stung investors already nervous about stock prices. The S&P 500 currently trades at 17 times forward earnings, higher than its 10-year median of 15, according to Thomson Reuters StarMine.

With Wednesday's loss, the Dow was up just 0.11 percent in 2015 while the S&P was up 1.03 percent and the Nasdaq 3.88 percent higher.

European shares ended lower, surrendering early gains as a rally in the euro and a fall on Wall Street prompted investors to trim their trading positions.

The FTSEurofirst 300 index of top shares finished 0.5 percent weaker at 1,547.72 points after rising as high as 1,562.18 earlier in the session following strong euro zone services data and some encouraging corporate results.

The euro climbed to a two-month high against the dollar, helped by business surveys pointing to a solid pick-up in euro zone economic activity and underpinned by German 10-year Bund yields that hit their highest this year.

The market sell-off gathered pace after US stocks fell on disappointing data, including weaker-than-expected private jobs numbers, raising concerns about the potential for an economic rebound from a first-quarter slump.

Europe's cyclical sectors were among the worst performers, with real estate, automobile, construction and material and travel and leisure falling 1.0 to 2.3 percent.

Some encouraging company results limited losses. Danish wind turbine maker Vestas Wind, mobile phone operator Telenor and AB InBev, the world's largest brewer, rose 1.1 to 3.5 percent.

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Tags:  stock  europe  US  Nikkei  





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