Wall Street stocks, bonds and gold drop as investors turn to the US dollar

  • The 10-year Treasury yield benchmark shot up to its highest level since summer 2011.
  • US stocks, bonds, and gold fall as investors turn to the US dollar. 
  • The prospect of three to four Fed rate hikes in 2018 is enticing investors to dump risky assets and favor cash. 

The three main US indices fell on Tuesday’s trading. The S&P 500 dropped 0.68% to 2,711.45 while the Dow Jones Industrial Average fell 0.78% to 24,706.41 and the tech-heavy Nasdaq lost 0.81% to 7,351.63. 

The 10-year Treasury yield benchmark shot up to its highest level since summer 2011 and was its best daily advance since March 2017 while the 2-year note yield rose to 2.591% which is the highest since 2008. Investors sold riskier assets such as equities and bonds to buy US dollars as market participants expect the Federal Reserve Bank to hike three and maybe four times in 2018. Gold was also dumped on Tuesday as investors see it as a non-yielding investment as compared to USD which is forecast to yield higher interest rates in the near future. The yellow metal broke a significant level at $1,300 a troy ounce and also broke below the 200-period simple moving average, which is a bearish signal.

On the geopolitical front, it has been reported that North Korea canceled a meeting with South Korea which was scheduled for Wednesday. North Korea says that the ongoing military drills by South Korea and the US are a “provocation and a preparation for invasion”. Additionally, South Korea is threatening to cancel the meeting with US President Donald Trump scheduled on June 12 in Singapore. US stocks ticked down on the news while gold had a mild boost but it is still at yearly lows on Tuesday. 

Dow Jones daily chart 

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