The markets are moving fast ahead of the State of the Union Address tonight. After a sizeable drop at the open, stocks managed to bounce back a little heading into the European close only for U.S. indices to then turn lower again shortly afterward.
The big moves have occurred in the stock markets with index futures tumbling in overnight trading, before bouncing back slightly. The stock market losses have been triggered by the recent sharp falls in government bond prices, which have helped to push yields higher.
After enjoying the best kickoff in more than three decades, the S&P 500 posted its biggest decline since 17 August 2017. All ten sectors traded in red territory suggesting that we didn’t see any rotation, but the selloff was broad-based led by energy, utilities, and telecom sectors.
Stocks, the dollar and bond yields all drifted lower on Monday as investors cashed in on some of their recent bets that the anticipated fiscal boost from the incoming Trump administration will support riskier assets at the expense of bonds.
A wild ride for bond markets since the U.S. election has re-ignited concern about a liquidity crunch in parts of the exchange-traded funds market, home to a small but fast-growing slice of global assets.
U.S. and European government bond yields, the main driver of global borrowing costs, hit their highest since June on Monday as questions mounted about how the world's big central banks could react to a sudden bout of inflation.