By Chuck Mikolajczak
NEW YORK (Reuters) – A gauge of global stocks pulled back from a record high on Monday but was poised for a fifth straight month of gains while the dollar remained lethargic as investors adjust to the policy shift outlined by Federal Reserve Chair Jerome Powell last week.
U.S. stocks were mixed, with the Dow Industrials in the red, the S&P 500 near unchanged while the Nasdaq rose solidly. The S&P is up more than 7% for the month, putting it on track for its best August since 1984; August is traditionally a softer month for stock performance.
The Nasdaq is on track to best the S&P’s performance for the month, up nearly 10%.
“It’s back to Nasdaq leadership and profit-taking in other parts of the market,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “I worry that sentiment has gotten frothy and there’s a lot of money in the market that doesn’t see any downside risk.”
Fed Vice Chair Richard Clarida on Monday expanded on Powell’s comments from last week, saying that with the U.S. central bank’s new policy view, a low rate of unemployment does not on its own trigger higher interest rates. Last week, the Fed said its new strategy plan is to use higher inflation when the economy is robust to offset the impact of periods of weaker prices.
Monday marked the day first trading day for the revamped Dow, with Salesforce.com <CRM.N>, Amgen Inc <AMGN.O> and Honeywell International Inc <HON.N> joining the 30-component index and Exxon Mobil Corp <XOM.N>, Pfizer Inc <PFE.N> and Raytheon Technologies Corp <RTX.N> being removed. Each of the new components was lower on the session.
The Dow Jones Industrial Average <.DJI> fell 207.97 points, or 0.73%, to 28,445.9, the S&P 500 <.SPX> gained 0.27 points, or 0.01%, to 3,508.28, and the Nasdaq Composite <.IXIC> added 117.00 points, or 1%, to 11,812.63.
The dollar edged lower against a basket of major currencies and was set for a fourth straight monthly decline.
In Europe, stocks closed lower on the day as financial shares were weighed down by soft inflation data in Germany and Italy, but managed to close higher for the month. Trading in London was closed for a public holiday.
MSCI’s world equity index <.MIWD00000PUS>, which has risen more than 6% in August, is set for a fifth month of gains as massive monetary and fiscal stimulus outweighs concern about the outlook for a world economy battered by the coronavirus. The index hit a record on Monday before reversing course on the day.
The pan-European STOXX 600 index <.STOXX> lost 0.62% and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> shed 0.14%.
For a graphic on MSCI’s World Stock Index:
https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdojyxvo/GLOB3108.png
The expectations for the Fed to keep interest rates lower for an extended period again kept the dollar in check, with a fourth straight month of declines marking its longest streak since 2017. The greenback, as measured against a basket of six other major currencies, hit a low of 91.989, its lowest level since May 1, 2018.
The dollar index <=USD> fell 0.129%, with the euro <EUR=> up 0.34% to $1.1943.
Treasuries benchmark 10-year notes <US10YT=RR> last rose 11/32 in price to yield 0.6933%, from 0.729% late on Friday.
Oil prices gave up earlier gains. Brent crude oil dipped from a five-month high, as global demand struggled to regain levels prior to the coronavirus pandemic.
U.S. crude <CLc1> recently fell 0.49% to $42.76 per barrel and Brent <LCOc1> was at $45.57, down 0.52% on the day.
For a graphic on Global markets, asset performance:
https://fingfx.thomsonreuters.com/gfx/mkt/bdwpkzkwyvm/Asset%20performance3108.PNG
(Reporting by Chuck Mikolajczak; Additional reporting by Medha Singh in Bengaluru; Editing by Lisa Shumaker and Leslie Adler)
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