Posted on 01/29/18
| News Source: CNBC
U.S. stocks traded lower on Monday as a jump in sovereign interest rates gave investors pause.
The Dow Jones industrial average fell 150 points. The S&P 500 declined 0.4 percent, with utilities and telecommunications as the worst-performing sectors. The Nasdaq composite also pulled back 0.4 percent.
The benchmark 10-year yield broke above 2.7 percent to reach its highest level since April 2014. Fears of higher inflation are sparking the sharp rise in bond rates this year.
"It is not just interest rates that continue to rise; inflation expectations are rising with them," said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a note. He also said 2.8 percent is the next key level to watch on the 10-year.
The Cboe Volatility index (Vix), widely considered the best gauge of fear in the market, rose 18.7 percent, or 2.09, to 13.16.
Stocks are off to a strong start for 2018. But a strategist at Goldman Sachs said there is a "high probability" the stock market experiences a correction in the coming months. Peter Oppenheimer, chief global equity strategist at Goldman Sachs, noted Monday that "correction signals are flashing" and is advising clients to prepare for a pullback.
Stocks closed at record highs on Friday, with the Dow surging more than 200 points, while the S&P 500 and Nasdaq climbed more than 1 percent. Tech was one of the best-performing sectors on Friday after Intel reported strong quarterly results.
"Last week reinforced that tech remains a critically important sector for the market, and tech must remain stable if stocks can rally short term," Tom Essaye, founder of The Sevens Report, said in a note. "We saw that in the price action last week. The whole week's gains came on Monday and Friday."
Equities were also boosted last week by stronger-than-expected quarterly results from major companies. Thus far, the corporate earnings season has been strong. Of the S&P 500 companies that have reported as of Monday morning, 78 percent have reported surpassed bottom-line expectations, while 77 percent have beaten revenue estimates, according to FactSet.
Boeing, McDonald's, Apple, Chevron, and Facebook are among the companies scheduled to report later this week.
Elsewhere in corporate news, K-Cup maker Keurig announced it will buy Dr Pepper Snapple. Keurig said Snapple shareholders will receive $103.75 per share in a special cash dividend and keep 13 percent of the new company. Dr Pepper Snapple jumped 29 percent on Monday.