(Bloomberg) — A rally that drove stocks to a series of all-time highs ran out of steam, with Treasury yields soaring and the dollar hitting a two-year high ahead of key inflation data.
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Equities fell after the S&P 500’s biggest five-day run in a year. Following sizable post-election gains, small caps and banks lost ground. Megacaps were mixed, with Nvidia Corp. up and Tesla Inc. down. Bitcoin slid after a sizzling advance that approached $90,000. The dollar hit its highest since November 2022, while the euro dropped to a one-year low. Treasury yields climbed ahead of data expected to show a pickup in consumer prices, which could further erode confidence in Federal Reserve rate cuts.
“A hot CPI and/or strong retail spending could push two-year yields above 4.45% (from around 4.3%) if a December rate cut starts looking imprudent,” said Will Compernolle at FHN Financial.
The post-election advance in US stocks could stall as investors start to take profits, according to strategists at Citigroup Inc. led by Chris Montagu. Investor exposure to US stocks jumped to the highest since 2013 after the presidential vote amid optimism around stronger economic growth, according to a survey from Bank of America Corp.
“We are on watch for potential profit taking, consolidation, or even correction for US equities heading into the first quarter of the new year,” said Dan Wantrobski at Janney Montgomery Scott. “Upward momentum remains strong and investor sentiment favorable, but stocks are once again overbought/extended across multiple timeframes.”
The S&P 500 fell 0.3%. The Nasdaq 100 dropped 0.3%. The Dow Jones Industrial Average slid 0.6%. The Russell 2000 slipped 1.5%.
Treasury 10-year yields advanced 13 basis points to 4.43%. The Bloomberg Dollar Spot Index rose 0.6%.
Bank of America clients funneled a net $2.7 billion into US equities last week as the presidential race was decided — posting net inflows for the first time in five weeks. Institutional and hedge fund clients led net purchases, while retail investors were net…
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