Stocks drop on new Fed fears

U.S. stocks halted a fourday rally with the steepest slide in almost two weeks, while 10-year Treasury yields pushed to levels last seen in 2011 as investors weigh the prospect for higher Federal Reserve rates.

The S&P 500 Index slumped as health-care and tech shares retreated. The Treasury selloff sent note yields to 3.07 percent. Higher rates sap demand for equities that have been on a tear for two weeks. Upbeat retail sales data fueled bets the Fed may raise rates three more times this year, pushing Bloomberg’s dollar index to its 2018 high. Emerging-market equities dropped the most since March. Gold fell below $1,300 an ounce for the first time since December.

Investors grappled with trade, growth, and geopolitical worries as a risk aversion spread across assets. Rising yields, a stronger dollar and sliding stocks are fast becoming a familiar and uncomfortable cocktail for investors. Now violence in the Middle East, the U.S.-China trade spat, uncertainty on Italy’s government and global growth concerns are helping cement the prevailing sentiment.

“Markets don’t know where to look, they don’t know where to focus,” said Samantha Azzarello, global market strategist for JPMorgan ETFs, in an interview at Bloomberg’s New York headquarters. “It’s odd — rates are going up and we’re late cycle, and then volatility is back after volatility being so low, almost painfully low. And then I think clouds of uncertainty coming from Washington and geopolitics lays on top of all of it.”

European equities were mixed but benchmarks fell in South Korea and Australia earlier, and in Hong Kong after data signaled investment slowing in China. Shanghai shares bucked the declines as the same numbers showed economic momentum broadly holding The euro slid following disappointing German growth data. Despite the sour mood, established safe-haven assets failed to catch a bid. Gold and the yen dropped, and the Swiss franc weakened.

Elsewhere, the Turkish lira hit a new low, plunging after President Recep Tayyip Erdogan said he intends to tighten his grip on the economy and take more responsibility for monetary policy if he wins an election next month. Emergingmarket stocks slumped.