* Dow, S&P 500 modestly lower, Nasdaq now slightly positive
* Energy weakest major S&P sector; tech leads gainers
* Euro STOXX 600 index falls ~0.8%
* Dollar, gold rise slightly; gold, crude down >3%
* U.S. 10-year Treasury yield ~1.60%
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BACK TO BONDS: REBALANCING SEEN ADDING TO THE PAIN (1000
Rising COVID-19 cases have surely been a dampener on the
euphoria that has boosted stocks so far this year, but it also
seems that an early month-end rebalancing is making things look
So while stocks are sold globally with both the STOXX
in Europe and the S&P 500 falling to around
2-week lows, pressure on bond prices is easing and yields have
fallen further from recent peaks.
"There is mention that early month end rebalancing flows
could be seeing some reallocation from equities to bonds,"
writes Rabobank strategist Richard McGuire in his daily note.
For Giuseppe Sersale, fund manager at Anthilia, the
pull-back looks more like a "physiological" bout of profit
taking but admits a portfolio rebalancing could be in play too
after the big outperformance of stocks relative to bonds.
"The end of the quarter with its related rebalancing of
flows is approaching and that perhaps is helping give relief to
bond prices," he says.
Meantime, Axi strategist Stephen Innes recalls that some
estimates predict there will be as much as $88.5 billion of
month-end rebalancing out of equities and into U.S. bonds.
U.S. STOCKS FALL EARLY; ENERGY A DRAG (0940 EDT/1340 GMT)
U.S. stocks are lower in early New York trading on Thursday,
with energy and industrials among the biggest drags on the S&P
Investors also assessed data showing jobless claims fell
last week as the labor market continued to limp out of a
The energy index is down more than 2%, with oil
prices falling sharply.
Nike shares are down. Nike and Adidas
came under fire on Chinese social media on Thursday after
Beijing's propaganda offensive against Swedish fashion brand H&M
sparked by the company's expression of concern about
labour conditions in Xinjiang.
Here is the early U.S. market snapshot:
SMALL CAPS: TOSSED AROUND (0900 EDT/1300 GMT)
The small-cap Russell 2000 is suddenly taking its
lumps. Indeed, the RUT has tumbled about 10% in just 7 trading
days, and is threatening to end a 5-month win streak.
Of note, the small-cap index flirted with a long-scale
monthly channel resistance line in February, as well as earlier
this month, and both times it has been swatted away:
On Feb. 10, the RUT reached as high as 2,318, putting it
just 1% shy of the channel barrier around 2,345. The index then
sold off as much as 10% in 16 trading days. And then on March
15, with its 2,360 high, it nearly tagged the line now residing
around 2,365. This more recent 10% slide has been accomplished
in less than half the time.
Meanwhile, over the past year, the RUT enjoyed a massive
snapback in relative performance vs the large-cap Dow Jones
Industrial Average. After falling to a 17-year low in
March 2020, the RUT/DJI ratio rose to 6-year high at 7.12% in
Of note, since 1988, this ratio has struggled much beyond
7.0%, with its highs between 7.12% and 7.25%. Additionally, a
broken support line from 1999, which is now resistance, was
another hurdle coinciding with levels just over 7%.
Therefore, recently, the RUT appeared to be at an important
juncture as it attempted to continue its advance, while
sustaining its outperformance vs the large-cap Dow.
Now, in less than a month, the RUT has essentially suffered
two 10% corrections, and the RUT/DJI ratio is on pace for its
biggest monthly percentage fall in a year.
Given its recent leadership role, a greater RUT downturn,
both in itself, and on a relative basis, may coincide with
increasing overall market instability.
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)