Global stocks pause after rally; U.S. bond yields hit 10-month high

By Chuck Mikolajczak
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., January 12, 2018. REUTERS/Lucas Jackson

By Chuck Mikolajczak

NEW YORK (Reuters) - A gauge of world stock markets slipped on Thursday, pausing after notching a run of record highs, as a decline in Boeing and interest-rate sensitive sectors such as utilities and real estate weighed on U.S. equities.

Shares on Wall Street took a breather after the strongest performance of the year for the Dow Jones Industrial Average and the benchmark S&P 500 saw the indexes close above 26,000 and 2,800, respectively, for the first time on Wednesday.

Equities were held in check by a 3.09 percent drop in aerospace company Boeing <BA.N>, the best performing Dow component so far the year. Utilities <.SPLRCU>, down 0.62 percent and real estate <.SPLRCR>, off 0.98 percent, also came under pressure as yields on the 10-year U.S. Treasury note touched a 10-month high.

"Maybe it takes a breather for a couple of days but I don’t see a big selloff," said Andrew Slimmon, portfolio manager at Morgan Stanley Investment Management in Chicago.

"When we get through earnings season and the market starts talking more macro, we are going to hit a problem, just because we are overbought."

Shares in Morgan Stanley <MS.N> advanced 0.89 percent after it reported an adjusted quarterly profit that topped Wall Street estimates.

Investors have looked to an improving global economy and the onset of the U.S. corporate earnings season in the recent run higher. Earnings growth for the quarter is forecast at 12.3 percent, according to Thomson Reuters data through Thursday morning.

The Dow Jones Industrial Average <.DJI> fell 97.84 points, or 0.37 percent, to end at 26,017.81, the S&P 500 <.SPX> lost 4.53 points, or 0.16 percent, to 2,798.03 and the Nasdaq Composite <.IXIC> dropped 2.23 points, or 0.03 percent, to 7,296.05.

European shares closed modestly higher, led by a rise in cyclical stocks.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.21 percent and MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.06 percent.

Yields on 10-year Treasury notes reached a 10-month high after China reported fourth-quarter growth that accelerated for the first time in seven years.

The benchmark notes <US10YT=RR> were last down 11/32 in price to yield 2.6163 percent, from 2.578 percent late on Wednesday. The data drove European counterparts higher as well, with Germany's 10-year bond yield <DE10YT=RR> hitting a six-month top at 0.595 percent.

The U.S. dollar fell as traders piled into the euro, yen <JPY=>, sterling <GBP=> and other major currencies amid worries over a possible U.S. government shutdown as lawmakers struggled to cobble together a federal budget deal.

The trade-weighted dollar index <=USD> was last down 0.45 percent with the euro <EUR=> up 0.45 percent to $1.2239.

Congressional Republicans struggled to line up support on Thursday for a short-term extension of government funding that would avert a politically embarrassing shutdown, after President Donald Trump offered mixed signals on the stopgap plan.

Oil prices recovered from early losses after a record drawdown of U.S. crude stockpiles at the Cushing, Oklahoma delivery hub.

U.S. crude <CLcv1> settled at $63.95 per barrel, down 2 cents, and Brent <LCOcv1> settled at $69.31, down 7 cents.

(Editing by Bernadette Baum and James Dalgleish)