Updated Sept. 12, 2016 9:37 a.m. ET
Stocks, bonds and oil prices continued to fall Monday amid concerns about tighter monetary policy, extending a rout that halted two months of calm summer trading.
The Dow Jones Industrial Average dropped 44 points, or 0.3%, to 18041 shortly after the opening bell. The S&P 500 declined 0.2%, and the Nasdaq Composite fell 0.1%.
The Stoxx Europe 600 shed 1.6%, while Hong Kong’s Hang Seng Index fell 3.4% in its worst day since February. Markets in Shanghai, Japan and Australia all closed with losses of about 2%.
The selloff in stocks and long-dated government bonds began Friday after comments from Federal Reserve Bank of Boston President Eric Rosengren heightened expectations for an interest rate rise later this year.
“Central banks get most of the credit for the calm and upward-moving market over the summer, but I don’t think we can depend on that going forward,” said Jeff Layman, chief investment officer at BKD Wealth Advisors.
The CBOE Volatility Index, or VIX, which tracks investors’ expectations for volatility in stocks, surged 40% on Friday.
A speech by Fed official Lael Brainard, known to oppose rate rises, is scheduled for later Monday, just ahead of the blackout period before the bank’s September meeting. Any positive comments from Ms. Brainard on the U.S. economy could heighten expectations for higher rates and deepen the pain for stock and bond markets after a steady summer climb.
“We had a stable period simply because it was clear from central bankers what would be delivered,” said Theologis Chapsalis, rates strategist at HSBC. “The message we get now is even a September rate hike cannot be excluded,” he said, adding what happens next is very much dependent on the Bank of Japan and the Fed on Sept. 21, when both conclude monetary policy meetings.
Fed-fund futures, used by investors to bet on central bank policy, currently suggest a roughly 24% chance of a rate rise in September, according to CME Group.
The yield on the 10-year Treasury note rose to 1.690% on Monday from 1.671% on Friday, its highest afternoon yield since June. Ten-year Japanese government bond yields pushed as high as minus 0.002%, according to Tradeweb, having spent most of the year in negative territory.
Many investors also remain disappointed by the European Central Bank’s decision last Thursday not to ease policy further at its most recent meeting. German 10-year bond yields climbed to 0.028%.
In currencies, the dollar fell 0.7% against the yen to ¥101.9570, while the euro declined 0.1% against the dollar to $1.1221.
U.S. crude oil dropped 2% to $44.98 a barrel, weighing on shares of energy and mining companies.
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