Wall St stocks fluctuate as Treasury auction attracts strong demand

Technology stocks gave up some strong morning gains and US government bonds steadied on Tuesday, as investors digested a large influx of new Treasury supply with ease.

Investors have been paying keen attention to US Treasury auctions following a poor sale late last month that prompted heavy selling and hectic price moves in the world’s largest bond market. But long-dated Treasuries pared back earlier losses in afternoon trading in New York following a $24bn auction of 20-year bonds that saw strong demand — the debt was offloaded at a yield of 2.29 per cent.

The yield on the 30-year bond, which falls as prices rise, was only 0.01 percentage points higher for the day, at 2.37 per cent, having previously traded above 2.39 per cent. The 10-year Treasury note rallied, sending the yield 0.01 percentage points lower to 1.59 per cent.

Traders were also keeping a close watch on the Federal Reserve policy gathering that started on Tuesday. Brian O’Reilly, head of market strategy at Mediolanum Asset Management, said the meeting would be the central focus for investors this week. “There’s a delicate balancing act between the recovering US economy and rising inflation,” he added. “But we don’t expect a significant policy change from [Fed chairman Jay Powell].”

The S&P 500 was flat in afternoon trading on Tuesday, while the tech-heavy Nasdaq Composite rose 0.4 per cent, having climbed more than 1 per cent in the morning. Chris Dyer, director of global equity at Eaton Vance, a US fund manager, said high-profile tech stocks were likely to continue doing well, following the congressional approval of President Joe Biden’s $1.9tn stimulus package last week.

“It is an extraordinary amount of stimulus,” he said.

The Vix — an index that tracks expected volatility in US equities — fell to a 12-month low, returning to its long-run average of about 20. “Volatility is continuing to come down,” Dyer said. “This could be an indication of greater confidence, but also complacency.”

In Europe, the region-wide Stoxx 600 closed up 0.9 per cent and Germany’s Xetra Dax added 0.7 per cent. The UK’s FTSE 100 gained 0.8 per cent.

“We’re at the start of a multiyear period of outperformance of international equities,” said Dyer, adding that the recovery favoured value stocks — such as equities in the finance and energy sectors — which have a heavier weighting in European and Asian indices.

In commodities, the price for palladium, a precious metal used in catalytic converters, jumped more than 4 per cent on Tuesday to $2,507 an ounce, its highest level since February last year. The leap in price comes after the Russian miner Norilsk Nickel cut its forecast for output following flooding at two of its mines.

Norilsk, the world’s largest producer of palladium, said the company’s Oktyabrsky and Taimyrsky mines would take three to four months to return to full capacity. As a result, its production of platinum group metals — palladium, platinum and rhodium — would fall by 710,000 ounces, which equates to about 8 per cent of global palladium supplies, according to analysts at RBC.

Oil slipped on Tuesday, bringing it down modestly from one-year peaks reached earlier this month. The US marker West Texas Intermediate fell 1 per cent to $64.72 a barrel, while the international benchmark Brent dropped 0.9 per cent to $68.24 a barrel.

In Asia, China’s CSI 300 index closed 0.9 per cent higher, Hong Kong’s Hang Seng gained 0.7 per cent and South Korea’s Kospi added 0.7 per cent.