Wall St stocks fall, bond yields rise as China lifts quarantine rule

NEW YORK, Dec 27 (Reuters) – The S&P 500 and Nasdaq closed lower on Tuesday after the release of U.S. economic data at the start of a holiday-shortened week, while bond yields rose after China said will lift its COVID-19 quarantine rule for arriving passengers.

U.S. Treasury yields rose as investors tried to gauge the path of interest rate hikes by the Federal Reserve and watched China ease restrictions. While changes in China were seen as a potential economic boost, financial managers were cautious about reports of rising infection rates there.

Meanwhile, U.S. economic data showed the goods trade deficit for November narrowed to $83.35 billion from $98.8 billion the previous month, while a separate report pointed to continued struggles in the housing market as home prices fell below rising interest on mortgage loans.

Oil futuresafter hitting a three-week high earlier in the day, were mixed on settlement with the restart of some U.S. power plants shut down by winter storms, offsetting hopes for a recovery in demand after of China recent easing restrictions.

Rising government bond yields are putting pressure on growth stocks, including the interest-sensitive technology sector, according to Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

“It’s a lack of someone with the conviction to step in and buy right now,” O’Rourke said.

The strategist also cited the weight of the sharp pullback for electric car maker Tesla Inc (TSLA.O)which fell 11.4% on Tuesday to its lowest close since August 2020. Reuters reported that Tesla plans a reduced production schedule in Shanghai in January, extending production cuts that began this month.

Gene Goldman, chief investment officer at Cetera Investment Management, described Tuesday’s session as “unsettled” as investors awaited minutes from next week’s Fed meeting and economic data such as the jobs report.

The Dow Jones Industrial Average (.DJI) rose 37.83 points, or 0.11%, to 33,241.76, the S&P 500 (.SPX) lost 15.56 points, or 0.40%, to 3,829.26 and the Nasdaq Composite (.IXIC) fell 144.64 points, or 1.38%, to 10,353.23.

Markets in some regions, including London, Dublin, Hong Kong and Australia, remained closed after the Christmas holidays.

MSCI’s gauge of stocks around the world (.MIWD00000PUS) lost 0.15% and is down 19.8% year-to-date.

While Cetera’s Goldman said China’s changing policies on COVID will be “good news for the global economy going forward,” he noted the renewed caution among people in China due to the ongoing spike in COVID infections since China eased restrictions.

The benchmark 10-year note rose 10.7 basis points to 3.854% from 3.747% late on Friday. The 30-year note was last up 12 basis points at 3.9417% from 3.822%. The last 2-year note rose 6.6 basis points to yield 4.3891% from 4.323%.

The dollar was mostly flat on Tuesday as investors digested news from China.

The dollar index which measures the greenback against a basket of major currencies, rose 0.086 percent, with the euro up 0.04 percent at $1.0639.

The Japanese yen weakened 0.49% against the greenback to 133.54 per dollar, while sterling last traded at $1.026, down 0.28% on the day.

“We’ve been in a very tight trading range and I think with the dollar strengthening against the euro and the yen, we could see further gains for the dollar against the Chinese currency,” said Mark Chandler, chief market strategist at Bannockburn Global Forex.

In energy futures, U.S. crude was down 0.04% at $79.53 a barrel, while Brent settled at $84.33, up 0.49% on the day.

Gold prices jumped to a six-month high on Tuesday, with traders upbeat about a decision by top consumer China to further ease COVID-19 restrictions.

Spot gold added 0.8% to $1,812.58 an ounce. U.S. gold futures rose 1.12% to $1,816.00 an ounce.

Reporting by Sinéad Carew in New York, Nell Mackenzie in London Additional reporting by Xie Yu and Ankur Banerjee Editing by Simon Cameron-Moore and Matthew Lewis

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