U.S. Stocks Pull Back

By Riva Gold Features Dow Jones Newswires

The S&P 500 bounced around the flatline Monday after closing at a record high Friday.

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The index slipped 0.1%, while the Dow Jones Industrial Average fell 19 points, or 0.1%, to 20988.

Investors sold European stocks and currencies Monday, brushing off Emmanuel Macron's widely anticipated victory in French elections.

The Stoxx Europe 600 edged down 0.2% from a two-year high as lower metals prices dragged down mining shares, while France's CAC-40 index fell 0.8% from its highest close since early 2008.

The euro was off 0.5% at $1.0940 after briefly touching a seven-month high following Sunday's victory for Mr. Macron, who vowed to reform France's economy and fight Europe's nationalist wave.

"With the market expecting this kind of result [in the French election], there is no goodwill effect today," said Gilles Pradère, a portfolio manager at RAM Active Investments.

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In the weeks between the first and second rounds of the French vote, Mr. Macron solidified his lead in the polls over anti-euro candidate Marine Le Pen, and European markets rallied as investors dialed down fears that France would ultimately pull out of the currency union. Spreads between French and German bonds fell back to November levels and eurozone stocks climbed to their highest level since 2015.

On Monday, many of the most popular assets during that period, including eurozone banks and French companies, sold off slightly as analysts said investors took profits after a good run.

Still, many were encouraged about the longer term picture in Europe. "A lot of the story of Europe is it's been held back by political risk," said Ryan Myerberg, portfolio manager at Janus Capital.

"As we put that to bed for some time, the market can focus on some positives that've been lost in the wash," he added.

Data last week showed the recovery in the eurozone economy broadening, with a measure of activity in the manufacturing and services sectors rising to a six-year high. Meanwhile, European earnings are on track for their best quarter in a decade, according to strategists at Morgan Stanley.

Despite a small pullback on Monday, "People definitely seem the most enthusiastic I've seen on European equities in a long time," said Pravit Chintawongvanich, chief derivatives strategist at Macro Risk Advisors.

In government bonds, German 10-year bund yields fell to 0.389% from 0.418% on Friday, while French yields fell to 0.738% from 0.770%, with many investors betting the news also cleared a hurdle for the European Central Bank as it considers winding down its massive stimulus program.

10-year Treasury yields fell to 2.335% from 2.352% on Friday. Yields move inversely to prices.

Focus for investors in Europe now turns to French legislative elections in June, which analysts say will determine whether Mr. Macron can push through his agenda, and upcoming votes in Germany and Italy.

Yields on Italian 10-year notes rose to 2.197% Monday from 2.168% Friday, as investors remained concerned about its fractious politics and sluggish growth. Yields on debt from Spain and Portugal were also little changed, sitting out on the rally in France and Germany.

Earlier, markets in Asia mostly moved higher, supported by the outcome in France and a record finish for the S&P 500 and Nasdaq Composite on Friday. Stocks had been lifted by earnings reports and a slightly better-than-expected April jobs report.

Japan's Nikkei Stock Average rose 2.3% to its highest level in 17 months as it reopened after public holidays. Korea's Kospi also added 2.3%, hitting an all-time high, while the S&P/ASX 200 in Australia gained 0.6%.

Stock markets in China were lower, however, amid concerns that sustained regulatory tightening might force funds to exit. Investors were jolted by rumors on social media Friday that regulators were scrutinizing asset-management operations as part of efforts to cut leverage in the financial industry.

Data also showed China's trade surplus widened in April, but both exports and imports grew less than expected.

The Shanghai Composite Index fell 0.8% Monday, while copper futures fell 1.8% to $5,483 a ton, dragging down Europe's basic resources sector. Figures released by the Chinese customs authority on Monday showed a 30% on-the-month fall in copper imports for April -- the lowest import level in six months, according to Investec.

"You're starting to see commodity weakness again filtering through, primarily because of China cracking down on speculative types of activity, raising short-term interest rates and causing leveraged players in China to dump positions," said Said Haidar, chief executive of global macro hedge fund Haidar Capital Management.

He has reduced exposure to mining companies and U.K. stock indexes recently as a result, and extended positions on bank-heavy European indexes.

Ese Erheriene, William Horobin,

Yifan Xie

, David Hodari and Yantoultra Ngui contributed to this article.

Write to Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

May 08, 2017 09:57 ET (13:57 GMT)