By Sue Chang, MarketWatch , Ryan Vlastelica
Dollar surges, bond rout continues on heels of Trump win
U.S. stocks retreated on Monday as the postelection rally fizzled with investors seeking more clarity on the policy proposals of president-elect Donald Trump's administration.
Major indexes surged last week, with the Dow Jones Industrial Average recording its biggest weekly gain since 2011 and hitting multiple records. The S&P 500 saw its largest weekly advance since 2014 on a belief that Trump's economic proposals--including infrastructure spending, massive cuts to the corporate tax rates and reduced financial andenvironmental regulation--will lead to accelerated economic growth. However, investors are taking note that there are few specific details about Trump's policies as of yet.
"We saw a big runup last week on expectations of what a Trump administration might do for the economy--but those are only expectations and Mr. Trump is more than two months away from assuming office," said Kristina Hooper, U.S. investment strategist for Allianz Global Investors.
The Dow Jones Industrial Average fell 12 points to 18,836. Earlier in the session, it rose modestly and hit another record level. Despite the slight retreat on the day, banking stocks, including J.P. Morgan Chase & Co. (JPM) and Goldman Sachs Group(GS) were stronger on expectations of rising rates--an environment that is seen as supportive to their business models.
The S&P 500 index fell 6 points, 0.3%, to 2,158 and the Nasdaq Composite dropped 35 points, or 0.7%, to 5,202. The weakness inthe tech-heavy Nasdaq was another trend that carried over from last week, when technology stocks sold off sharply (http://www.marketwatch.com/story/tech-stocks-suffocated-by-uncertainty-2016-11-09).
Read:Trump rally to be followed by 11% stock-market tumble, forecasts Tom DeMark (http://www.marketwatch.com/story/in-wake-of-trump-rally-tom-demark-calls-for-11-stock-market-decline-2016-11-11)
"There are a lot of people who are waiting to see the actualities of his proposals, because right now we only have the broad-brush outlines," said Mark Grant, chief fixed income strategist at Hilltop Securities, who added that he nonetheless expected the new administration's policies to help stock prices. "I'm very bullish about the equity market right now," he said.
Hooper was likewise upbeat on the market.
"We would expect a somewhat upward bias to stocks in the near term. While valuations are stretched, there is significant positive sentimentto propel equities," she said.
Read:Trump is turbocharging the stock market's V-shaped surge (http://www.marketwatch.com/story/trump-is-turbocharging-the-stock-markets-v-shaped-surge-2016-11-12)
Apart from the three major indexes, a number of other market benchmarks are trading higher, including the Russell 2000 index , up 0.9%. The S&P Small Cap 600 Index , climbed 1% and the S&P 400 Mid Cap Index rose 1.1%.
Need to know:Why investors could come to regret last week's appetite for stocks (http://www.marketwatch.com/story/why-investors-could-come-to-regret-last-weeks-appetite-for-stocks-2016-11-14)
European stocks were also paring earlier gains, with the Stoxx Europe 600 index up just 0.3%, after opening up 0.8%. Asian stocks had a mixed day (http://www.marketwatch.com/story/nikkei-surges-leaving-other-asian-markets-in-the-dust-2016-11-13), with the Hong Kong Hang Seng Index dropping 1.4%, while the Nikkei 225 index rose 1.7% ona weak yen.
Gold reversed its earlier drop to add 0.2% while oil prices fell more than 2%.
(http://www.marketwatch.com/story/reince-priebus-said-to-be-top-contender-for-trumps-chief-of-staff-2016-11-13) (http://www.marketwatch.com/story/donald-trump-tells-supporters-to-stop-harassment-2016-11-13)The yield on the U.S. 10-year Treasury bond traded as high as 2.36%, the highest since November, according to FactSet. The 30-year bond yield moved above 3%, the highest since January. The yield on the two-year Treasury note moved above 1% for the first time since March.
Read:U.S. Treasury yields surge, add to Trump-fueled climb (http://www.marketwatch.com/story/us-treasury-yields-surge-add-to-trump-fueled-climb-2016-11-14)
Bonds have been suffering on the view that while Trump's policies could be good for growth, they could also be inflationary, meaning the Federal Reserve may be forced to raise interest rates faster than markets expected. Mutual and exchange-traded funds benchmarked to the Bloomberg Barclays Aggregate U.S. Bond Index lost about $18 billion in value last week (http://www.marketwatch.com/story/bond-funds-lost-18-billion-in-value-during-this-weeks-trump-inspired-selloff-2016-11-11).
Read:With Trump win comes expectations for interest rates to rise 'bigly' (http://www.marketwatch.com/story/with-trump-win-comes-expectations-for-rates-to-rise-bigly-2016-11-11)
The dollar (http://www.marketwatch.com/story/dollar-hits-multi-month-highs-versus-euro-yen-loonie-2016-11-14) was continuing last week's strong performance, hitting multimonth highs against the euro, yen and Canadian dollar on Monday. The ICE Dollar index , which measures the dollar's strength against six of its biggest rivals, rose to 99.932 from 99.055 late Friday, trading roughly at the highest level in about a year, according to FactSet.
Economic docket: There is no major economic data on Monday's calendar, but there is a lineup of Fed speakers.
Fed Chairwoman Janet Yellen this week (http://www.marketwatch.com/story/yellen-to-testify-next-week-on-economic-outlook-before-congress-2016-11-10) will testify before Congress about the economic outlook, roughly a month before a Fed meeting, which many believe could deliver a U.S. interest-rate hike.
Richmond Fed President Jeffrey Lacker will appear on a panel discussion on fiscal policy and debt in Chestertown, Md., at 5 p.m. Eastern. Then San Francisco Fed President John Williams will speak on growing China trade and investment in San Francisco at 6:30 p.m. Eastern.
Stocks to watch:Siemens AG(SIE.XE) said it has agreed to buy U.S.-based Mentor Graphics Corp.(MENT) in a merger deal worth $4.5 billion (http://www.marketwatch.com/story/siemens-agrees-to-buy-us-based-mentor-in-45-billion-deal-2016-11-14). Shares of Mentor rose nearly 18%.
Samsung Electronics Co.(005930.SE) said it would buy U.S. auto-parts supplier Harman International Industries Inc.(HAR) for $8 billion in an all-cash deal (http://www.marketwatch.com/story/samsung-to-buy-car-audio-maker-harman-for-8-bln-2016-11-14). (http://www.marketwatch.com/story/samsung-to-buy-car-audio-maker-harman-for-8-bln-2016-11-14) Harman shares soared 25%.
--Barbara Kollmeyer contributed to this article.
(END) Dow Jones Newswires
November 14, 2016 13:12 ET (18:12 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.