Stocks Slip as Hurricane Irma Threatens U.S., Bond Yields Fall

By Christopher Whittall and Kenan Machado Features Dow Jones Newswires

Stocks in the U.S. and Europe rose Thursday, and the euro jumped against the dollar, after the European Central Bank left its monetary policy unchanged while reaffirming the resilience of the eurozone economy.

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The Dow Jones Industrial Average gained 28 points, or 0.1%, to 21836 shortly after the opening bell. The S&P 500 added less than 0.1% and the Nasdaq Composite rose less than 0.1%.

Shares of U.S. companies were on track for their second consecutive day of gains as investors, nervous following weeks of ongoing tension between the U.S. and North Korea, got some clarity on domestic and international policy moves.

President Donald Trump backed a deal Wednesday with congressional Democrats to attach hurricane relief money to a three-month extension of both government funding and the debt limit. In Europe, investors were focusing their attention on the ECB on Thursday in the hope of getting more details on when the central bank could scale back its bond purchases.

But ECB President Mario Draghi gave little away on that front, saying decisions over its policy mix would likely be made in October. But Mr. Draghi did address another major talking point: the recent rise of the euro. The single currency is up over 14% against the dollar this year. That has damped eurozone inflation by lowering import prices and led the ECB to cut its inflation forecast slightly on Thursday.

Mr. Draghi said the recent exchange-rate volatility "represents a source of uncertainty" that requires monitoring. But investors appeared to focus on the ECB's upgrade of its growth forecasts, which helped send the euro up 0.5% to $1.1983.

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The Stoxx Europe 600 was recently up 0.5%.

Seamus Mac Gorain, a portfolio manager at J.P. Morgan Asset Management, said there is a limit to how far the ECB can talk down the currency given the strong growth in the eurozone and the fact that the euro doesn't look overly expensive based on traditional currency valuation models.

Still, the euro's rapid appreciation in recent months will mean the ECB won't "want it to go too much higher from here," he added.

Elsewhere in currency markets, the WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, fell 0.5%.

Bond prices strengthened in the U.S., as the 10-year Treasury yields slipped to 2.080%, according to Tradeweb, from 2.108% on Wednesday.

The biggest moves in the Asia-Pacific region came in Korea, where the Kospi rose 1.1%. as attention -- for now -- shifted away from North Korea. The rebound came after five consecutive trading sessions in the red, to mark its longest losing streak since April. Japan's Nikkei Stock Average rose 0.2% and the Shanghai Composite Index fell 0.6%.

Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com

U.S. stocks slipped Thursday, as financial stocks sagged under the pressure of falling bond yields and the threat of Hurricane Irma.

The Dow Jones Industrial Average fell 36 points, or 0.2%, to 21772. The S&P 500 and the Nasdaq Composite both slipped about 0.1%.

Shares of U.S. companies had opened higher following the European Central Bank's decision to leave monetary policy unchanged while reaffirming the resilience of the eurozone economy, which also caused the euro to strengthen. But falling Treasury yields, along with concerns over the threat the hurricane poses to insurers, contributed to stocks' drop later in the morning.

Shares of financial companies in the S&P 500 were down 1.7%, led by declines in insurance companies Everest Re Group and XL Group.

U.S. government-bond prices strengthened, sending the yield on the 10-year Treasury note down to 2.047%, according to Tradeweb, from 2.108% on Wednesday.

In Europe, investors were focusing their attention on the ECB in the hope of getting more details on when the central bank could scale back its bond purchases.

But ECB President Mario Draghi gave little away on that front, saying decisions over its policy mix would likely be made in October. But Mr. Draghi did address another major talking point: the recent rise of the euro. The single currency is up over 14% against the dollar this year. That has damped eurozone inflation by lowering import prices and led the ECB to cut its inflation forecast slightly on Thursday.

Mr. Draghi said the recent exchange-rate volatility "represents a source of uncertainty" that requires monitoring. But investors appeared to focus on the ECB's upgrade of its growth forecasts, which helped send the euro up 0.8%, to $1.2018.

The Stoxx Europe 600 was recently up 0.1%.

Seamus Mac Gorain, a portfolio manager at J.P. Morgan Asset Management, said there is a limit to how far the ECB can talk down the currency given the strong growth in the eurozone and the fact that the euro doesn't look overly expensive based on traditional currency valuation models.

Still, the euro's rapid appreciation in recent months will mean the ECB won't "want it to go too much higher from here," he added.

Elsewhere in currency markets, the WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, fell 0.6%.

The biggest moves in the Asia-Pacific region came in South Korea, where the Kospi rose 1.1%. as attention -- for now -- shifted away from North Korea. The rebound came after five consecutive trading sessions in the red, to mark its longest losing streak since April. Japan's Nikkei Stock Average rose 0.2% and the Shanghai Composite Index fell 0.6%.

Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

September 07, 2017 11:11 ET (15:11 GMT)