2-5-18 8:00 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.

A global stock selloff was under way 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?

Dow Jones Industrial Average futures fell 260 points, or 1%, to 25,167.

S&P 500 futures dropped 17.45 points, or 0.6%, to 2,739, while Nasdaq-100 futures tumbled 62.50 points, or 0.9%, to 6,692.

A stronger-than-expected U.S. monthly jobs report weighed 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 could continue to peel some money away from equities. The yield on the 10-year U.S. Treasury note at one point reached as high as 2.883%. It has since dropped back to 2.844%, a gain of 5 basis points.

The 10-year yield has been trading around levels last seen four years ago in the wake of Friday's monthly jobs report that revealed a jump in wage growth. 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 more than 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 in 2018. That is 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?

"In effect, U.S. markets have hit an air pocket of sorts," said Chris Weston, chief market strategist at IG, in a note.

"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," said Roland Kaloyan, head of European equity strategy and other strategists, at Société Générale, in a note to clients on Monday.

"Financial history is full of false warnings of imminent bear markets--but right now we miss any key component, with no imminent recession in a major economy, no financial crisis, no one particular over-extended sector of the economy or stock market," said Tom Elliot, international investment strategist at deVere Group, in a note to clients. Calling it a "storm in a teacup, he predicts a recovery rally within the weeks.

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 Walt Disney Co.(DIS) on Tuesday, Tesla Inc.(TSLA) on Wednesday and Twitter Inc.(TWTR) on Thursday.

Bristol-Myers Squibb Co.(BMY) shares jumped nearly 6% after reporting positive results for advanced lung-cancer trial results (http://www.marketwatch.com/story/bristol-myers-surges-56-on-advanced-lung-cancer-trial-results-q4-earnings-2018-02-05), along with fourth-quarter profit and revenue beats.

Qualcomm Inc.'s stock (QCOM) rose 4% premarket after Broadcom Ltd.(AVGO) boosted its bid to buy the chip maker (http://www.marketwatch.com/story/broadcoms-sets-best-and-final-buyout-bid-for-qualcomm-at-82-a-share-2018-02-05) by 17% to a "best and final offer" of $82 a share.

Wells Fargo Inc.(WFC) dropped 8% in premarket trading after the bank said Federal Reserve sanctions over customer-accounts scandals could cut into profit by as much as $400 million this year (http://www.marketwatch.com/story/wells-fargo-says-impact-from-fed-sanctions-may-reach-400-million-2018-02-03).

Apple Inc. shares (AAPL) could be in focus. The iPhone maker is reportedly on pace to surpass Spotify and boast the most popular music streaming service in the U.S. by next summer, according to 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).

Which economic data reports are due?

Monday's data calendar includes a Markit January reading on a purchasing managers index for services, due at 9:45 a.m. Eastern Time. That is 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 (http://www.marketwatch.com/story/european-stocks-covered-in-sea-of-red-as-global-selloff-picks-up-steam-2018-02-05) were a sea of red, while Asian markets mostly 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 Japanese gauge since Nov. 9, 2016.

Gold futures steadied, while oil futures dropped 1% (Bristol-Myers Squibb Co. (TICKER:BMY)%c2%a0will%20report%20ahead%20of%20the%20bell%20on%20Monday.) 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 08:00 ET (13:00 GMT)

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