Market Update: Stocks Pare Losses as U.S. Dollar Hits Three-Month High

U.S. stocks declined for a third consecutive session Monday, while the dollar jumped to three-month highs as 10-year yields approached 3% for the first time since 2014.

Stocks Mostly Lower

Equity markets traded mixed-to-lower at the start of the week, with the S&P 500 Index paring losses in the final moments of trade. The index closed at 2,670.29, where it was little changed for the day.

Five of 11 S&P 500 sectors finished in negative territory, with information technology falling 0.4%. On the opposite side of the spectrum, telecommunications services rose 1.1% and energy added 0.6%.

Declining tech shares weighed on the Nasdaq Composite Index, which settled down 0.3% at 7,128.60.

Meanwhile, the Dow Jones Industrial Average slipped 14.25 points, or 0.1%, to close at 24,448.69. The blue-chip index was down as much as 134 points earlier in the day.

The decline in stocks appears to have been triggered by a steep rise in bond yields. The 10-year Treasury note peaked at 2.99%, threatening to hit 3% for the first time since January 2014. Yields have been rising as investors offload Treasurys on expectations of rising inflation. A yield at or above 3% may signal a downturn in the stock market.

Dollar Hits Three-Month High

Rising yields drove the U.S. dollar to its highest level since January.

The dollar index (DXY), which measures the greenback’s performance against a basket of six peers, rose 0.7% to 90.93. Monday’s performance allowed the dollar to trim its year-to-date decline to -1.3%. At its lowest point, the dollar was down nearly 4% for 2018.

Against the Japanese yen, the dollar surged 1% to overtake the 108.00 level for the first time since February.

The euro, pound and Canadian dollar all fell versus the greenback.

Currency speculators are calling for the Federal Reserve to raise interest rates three times this year. Analysts at Goldman Sachs believe a fourth interest rate hike is also on the table.

Busy Week for Earnings

Investors are also bracing for the busiest week of the Q1 earnings season, with 170 companies scheduled to report results. Some of the most prominent names include Verizon (VZ), Travelers Cos (TRV) and Visa (V), which are all Dow blue chips.

Google-parent Alphabet (GOOGL) report quarterly earnings Monday, beating analysts’ expectations on both the top and bottom line. The company earned $9.93 per share on revenue of $31.15 billion. Analysts had called for EPS of $9.28 on revenues of $30.29 billion.

Corporate earnings have come in largely ahead of expectations over the past two weeks. According to FactSet, 80% of S&P 500 companies that have reported so far have posted positive earnings surprises. Combined, their blended earnings growth rate foe Q1 2018 is 18.3%.

Featured image courtesy of Shutterstock. 

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi