U.S. Stocks Head for Weekly Drop Amid Tax Debate

• U.S. Stocks Head for Weekly Drop Amid Tax Debate

Treasuries fell for a third day and U.S. stocks limped to the end of a week that saw a bout of volatility return to global financial markets.

The S&P 500 Index slumped, led in part by health-care shares, which dropped by 1 percent. Energy stocks also struggled as WTI crude fell below $57 a barrel. The yield on 10-year Treasuries punched through 2.37 percent, joining a spike in European sovereign rates as inflation worries ratchet up. The dollar was little changed as President Donald Trump’s Asia trip winds down. High-yield debt steadied as the largest junk bond exchange-traded fund rose after three days of declines.

“A bit of a theme has been Amazon getting into the health-care channel and the distribution space, that’s definitely been weighing on shares in the last few days,” Mike Bailey, director of research at FBB Capital Partners in Bethesda, Maryland, said by phone. “Citigroup did a pretty big report about Amazon getting into the space that came out last night. They were hinting that Amazon may at some point get into selling medical devices as opposed to just getting into distribution.”

Carmakers led the Stoxx Europe 600 Index to its biggest two-day drop since August, with most industry sectors declining. Stocks in Asia fell after a rally earlier in the week that saw them touch record highs. Yields on 10-year Treasuries rose a third day, and core European bond yields followed suit.

Global equities hit historic highs during the week as investors were encouraged by solid earnings and synchronized global economic growth. But they sold off sharply on Thursday as the U.S. Senate revealed that its tax plan would delay cuts to the corporate rate until 2019. The move fed growing pessimism about the prospects for meaningful U.S. fiscal reform, which had buoyed share prices in the U.S.

In addition, traders have begun preparing for a series of potential interest rate increases by the Federal Reserve over the next 12 months.

“You have a Fed that with a 4.1 percent unemployment rate appears to be on cruise control for three or four hikes over the next year,” said Dennis DeBusschere, head of portfolio strategy at Evercore ISI. “In the context of there being very little inflation, if they do that it implies tighter financial conditions which will help flatten yield curves and increase risk premiums a bit. That has a lot to do with what’s going on right now.”

Stocks

• The S&P 500 fell 0.2 percent to 2,580.10 of 12:49 p.m. in New York.
• The Stoxx Europe 600 Index slid 0.4 percent to the lowest in more than two weeks.
• The U.K.’s FTSE 100 Index dropped 0.7 percent.
• Germany’s DAX Index dipped 0.4 percent.
• The MSCI Emerging Market Index declined 0.6 percent, the biggest drop in more than three weeks.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The euro gained 0.1 percent to $1.1658.
• The British pound climbed 0.4 percent to $1.3197.
• The Japanese yen dropped less than 0.1 percent to 113.53 per dollar.
• South Africa’s rand sank 0.9 percent to 14.3802 per dollar, the weakest in a year.

Bonds

• The yield on 10-year Treasuries increased six basis points to 2.3966 percent, the largest climb in three weeks.
• Germany’s 10-year yield increased four basis points to 0.41 percent, the highest in more than two weeks.
• Britain’s 10-year yield increased eight basis points to 1.342 percent, the largest increase since September.

Commodities

• West Texas Intermediate crude slipped 0.7 percent to $56.78 a barrel.
• Gold dropped 0.7 percent to $1,275.61 an ounce.
• Copper fell 0.3 percent to $3.08 a pound.