2-5-18 4:35 AM EST | Email Article

By Barbara Kollmeyer, MarketWatch

Global losses pick up steam as European equity markets wade in red and Japan logs biggest fall in more than a year

U.S. stocks faced renewed selling pressure Monday, after suffering their biggest single-session declines in more than a year on Friday.

Dow Jones Industrial Average futures were down nearly 100 points, as bond yields continued to climb, dulling the appeal of equities for traders.

The global stock selloff was picking up steam Monday, as European stocks opened sharply lower. In Asia, selling was widespread, with Japanese stocks suffering their biggest decline since November 2016.

What are the main benchmarks doing?

In volatile action, Dow Jones Industrial Average futures slipped around 89 points, or 0.3%, to 25,339, while S&P 500 futures dropped 5.45 points, or 0.2%, to 2,751.50. Nasdaq-100 futures slipped 8 points, or 0.1%, to 6,748.50.

A stronger-than-expected U.S. monthly jobs report took a heavy toll on stocks Friday (http://www.marketwatch.com/story/dow-futures-tumble-more-than-250-points-on-jobs-day-2018-02-02). In the biggest one-day drop since September 2016, the S&P 500 index closed down 2.1% at 2,762.13. The Dow Jones Industrial Average tumbled 665.75 points, or 2.5%, to end at 25,520. Those two indexes suffered their biggest weekly declines in more than two years.

The Nasdaq Composite Index slid 144.92 points, or 2%, to end at 7,240.95. Its weekly loss was the largest in about two years.

What could help drive markets?

Rising bond yields looked set to continue haunting investors, with the yield on the 10-year U.S. Treasury note up one basis point to 2.854% on Monday and global equities under pressure.

On Friday, the yield rose to a four-year high above 2.83% after January jobs data revealed wage growth expanded at the fastest rate clip in more than eight years. That stoked inflation fears and in turn, concerns the Federal Reserve will increase interest rates faster than expected. Jerome Powell will formally take over as chairman of the Federal Reserve on Monday, replacing Janet Yellen (http://www.marketwatch.com/story/yellen-to-join-bernanke-at-washington-think-tank-2018-02-02).

Read:Stock-market melt-up takes a timeout as bond yields rise (http://www.marketwatch.com/story/stock-market-taking-its-cues-from-bond-yields-2018-02-03)

Despite last week's losses, the S&P 500 and Dow are still up over 3% year to date. Bank of America Merrill Lynch warned Friday (http://www.marketwatch.com/story/bank-of-america-sell-signal-triggered-for-stocks-2018-02-02) that a sell indicator has been triggered for the market as $102 billion has flowed into global equities year-to-date. That's amid widespread concerns over valuations.

Opinion:Tony Robbins on stock market corrections: Get used to them (http://www.marketwatch.com/story/tony-robbins-on-stock-market-corrections-get-used-to-them-2018-02-02)

What are strategists saying?

"The fact there we have now heard from the over two-thirds of the S&P 500 and certainly the bulk of the mega index weights should make us question what is the new inspiration and what effectively stabilizes risk from here. So, in effect, U.S. markets have hit an air pocket of sorts," said Chris Weston, chief market strategist at IG, in a note to clients.

"After being bullish risk assets for some time, recent price action and the currently technical set-up suggests the risks to global equities seem elevated to the downside," Weston added.

"Rising U.S. treasuries yields should continue to put pressure on U.S .equities, as we have seen over the last week. Indeed, our U.S. equities risk premium is back to 2.5% (a level only seen during the dotcom bubble), and thus it will be difficult to absorb higher bond yields," said Roland Kaloyan, head of European equity strategy and other strategists, at Societe Generale, in a note to clients on Monday.

Which stocks look like key movers?

Investors may not be able to look to earnings for much inspiration as the bulk of U.S. companies have now reported, along with some of the biggest names. A few big companies are still to report this week, including General Motors Co. (GM) and The Walt Disney Co (DIS) on Tuesday, Tesla Inc. (TSLA) on Wednesday and Twitter Inc. (TWTR) on Thursday.

Qualcomm Inc. (QCOM) could be active after The Wall Street Journal reported, citing sources, that Broadcom Ltd. (AVGO) plans to lift its hostile offer for the rival chipmaker to $120 billion (http://www.marketwatch.com/story/biggest-ever-tech-deal-looms-as-broadcom-plans-to-sweeten-qualcomm-offer-to-120-billion-2018-02-05), with a deal possibly coming as soon as Monday.

Apple Inc. (AAPL) shares could be in focus. The iPhone maker is reportedly on pace to surpass Spotify as the most popular streaming service in the U.S. by next summer, according to sources cited by The Wall Street Journal (http://www.marketwatch.com/story/apple-music-on-pace-to-pass-spotify-as-no-1-streaming-service-in-us-by-summer-2018-02-04).

Bristol-Myers Squibb Co. (BMY) will report ahead of the bell on Monday.

Which economic data reports are due?

Monday's data calendar includes the Markit Services Purchasing Managers' Index for January, due at 9:45 a.m. Eastern Time. That's followed by the Institute of Supply Management nonmanufacturing index for the same month, scheduled for release at 10 a.m. Eastern.

What are other assets doing?

European stocks were in a sea of red as the global selloff picked up steam (http://www.marketwatch.com/story/european-stocks-covered-in-sea-of-red-as-global-selloff-picks-up-steam-2018-02-05). Barring China stocks, Asian markets suffered a broad selloff (http://www.marketwatch.com/story/asian-markets-pull-back-following-wall-streets-friday-flop-2018-02-04), with the Nikkei 225 index tumbling 2.5. That was the biggest drop for the Japan index since Nov. 9, 2016.

Gold steadied, while oil futures also fell and the ICE U.S. Dollar Index was edging south, largely driven by weakness against the Japanese yen .


(END) Dow Jones Newswires

February 05, 2018 04:35 ET (09:35 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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