United States stocks fell firmly on Tuesday after a surge in USA government bond yields to their highest level in nearly seven years challenged appetite for equities compared with climbing rates for risk-free bonds.
The yield on the benchmark 10-year note ripped through the four-year high it hit three weeks ago, finishing 9 bps above yesterday's close at 3.08% for its highest close since July 2011, and the two-year yield gained 4 bps to 2.58%, its highest close since July 2008.
Losses in technology and health care companies helped pull stocks lower Tuesday, snapping an eight-day winning streak by the Dow Jones industrial average.
Canada's main stock index reversed course to edge higher on Tuesday, as gains in industrial stocks led by Air Canada more than offset a drop in miners due to declining gold prices. The S&P 500 lost 19 points, or 0.68%, to 2,711 and the Nasdaq Composite fell 60 points, or 0.81%, to 7,352.
In Asia, shares declined on Wednesday in morning session after North Korea pulled out of high-level talks with Seoul and as US Treasury yields rose to the highest level in seven years overnight.
The Nasdaq composite rose 8.43 points, or 0.1 percent, to 7,411.32.
On Tuesday, the bond market appeared to hold investors' focus.
The surge came after the Commerce Department said retail sales climbed 0.3 percent in April and revised March sales growth upward, to 0.8 percent from 0.6 percent.
US light crude closed 35 cents, or 0.5 per cent, higher at $71.31 a barrel, also not far off the day's peak at $71.92, its highest since November 2014. The retail sales data suggest that consumers are spending more after a weak first quarter.
"A combination of firm growth and higher interest rates is unnerving", said Anthony Chan, chief economist for Chase in NY.
The Federal Reserve has signaled it will raise rates twice more this year, after having done so in March, and most economists foresee the next increase in June.
The market had rallied early Monday on hopes that trade tensions were easing between the USA and China. Real estate.SPLRCR, healthcare.SPXHC and technology.SPLRCT stocks posted the biggest percentage losses. Brent crude, used to price global oil, added 20 cents to close at $78.43 a barrel in London. The euro weakened to $1.1847 from $1.1944. Apple Inc. fell 0.9%.
The pan-European FTSEurofirst 300 index rose 0.14 per cent. Hong Kong's Hang Seng fell 0.8%.