2-5-18 9:24 AM EST | Email Article

By Barbara Kollmeyer, MarketWatch , Ryan Vlastelica

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

U.S. stock-index futures pointed to a lower open on Monday, suggesting Wall Street would build on Friday's weakness, which saw the biggest single-session declines in more than a year for stocks.

Weakness was global, with both European and Asian stocks sharply lower. Japanese stocks suffered their biggest one-day drop since November 2016.

What are the main benchmarks doing?

Dow Jones Industrial Average futures fell 160 points, or 0.7%, to 25,263. Futures for the blue-chip average had previously been down about 300 points.

S&P 500 futures dropped 9 points, or 0.3%, to 2,747, while Nasdaq-100 futures tumbled 24 points, or 0.4%, to 6,731.

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), as investors took the strength as a sign that the Federal Reserve could be more aggressive in raising interest rates than previously expected. 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.

At current levels, the Dow is more than 4 percentage points below its all-time high, while both the S&P and the Nasdaq are less than 4 percentage points. The S&P has gone an unprecedented length of time (http://www.marketwatch.com/story/heres-another-milestone-the-sp-500-could-surpass-this-month-2018-01-03) without a 5% pullback, something that is historically extremely common.

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 rise in yields means that bond prices are declining, as prices and yields move inversely to each other.

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?

"The bond market selloff is the biggest catalyst behind the drop in stocks, as investors are worried about the Fed's timetable for raising rates. However, we've been going almost straight up since the start of the year, so this pullback is both expected and healthy," said Randy Frederick, vice president of trading and derivatives for Charles Schwab.

"It doesn't mean the bull market is over; it simply takes away some of the froth and irrational exuberance from stocks and puts us back on a more sustainable trendline."

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).

Corcept Therapeutics Inc.(CORT) tumbled 21% in premarket trading after the drug market disclosed that it had been informed Teva Pharmaceutical Industries Ltd. (TEVA)had submitted a new drug application (http://www.marketwatch.com/story/corcepts-stock-tumbles-after-teva-submits-nda-for-generic-korlym-2018-02-05) for a generic version of Corcept's hyperglycemia treatment Korlym.

Exxon Mobil Corp. (XOM) was down 1.6% in premarket trading, alongside a drop in the price of crude oil.

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 .

Digital currencies continued their recent retreat (http://www.marketwatch.com/story/bitcoin-drops-below-8000-after-another-bank-ban-on-credit-card-buying-hits-2018-02-05), and bitcoin fell below $8,000, trading at levels last seen in November. The world's largest cryptocurrency has lost more than half its value since a high reached in December.

 

(END) Dow Jones Newswires

February 05, 2018 09:24 ET (14:24 GMT)

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