Morning Bid: S&P500 loses 6,000 handle amid U.S. slowdown fears

Consensus forecasts are for a drop in the gauge to five-month lows.

The underwhelming picture is captured best by a drop in the U.S. economic surprise index over the past week to its most negative since September.

CONSUMER CONFIDENCE

And there’s also growing fears that any shakeout in stocks from here could well compound a consumer confidence retreat by sapping the ‘wealth effect’ in richer households who dominate retail spending aggregates.

The concern is significant enough to shift the dial on Treasuries too.

Ten-year Treasury yields have plunged to their lowest for the year at 4.33%, clocking losses of 20 basis points in less than two weeks. Two-year yields plumbed as low as 4.11% to their lowest since December 11.

And even Fed futures have sat up and taken notice – with another rate cut now fully priced again before July and more than two full cuts in price for whole year.

In that environment, the dollar has held remarkably steady so far – caught between the domestic economic stumble and yield moves and the pressure of upcoming tariff rises. Mexico’s peso, Canada’s dollar and China’s yuan were marginally weaker.

But the wider market risk environment is fraying at the edges.

Bitcoin plunged back below $90,000 for the first time in a month to hit its lowest since November, shortly after Trump’s election was supposed to usher in some new era for the crypto world.

Elsewhere, the focus continued to be on Europe’s stock outperformance – with cheaper valuations there, repatriation of European money from Wall Street, this week’s German election results and hopes for euro-wide fiscal boosts playing a part.

Despite losses on Wall Street and in China over the past 24 hours, the pan-European STOXX 600 index rose 0.3% on Tuesday.

Fears that a messy U.S.-Kremlin brokered deal to end the Ukraine war without rolling back Russia’s three-year old invasion of the eastern part of the country have sent shockwaves across Europe and defense spending is now a huge priority.

The European aerospace and defence index jumped again on Tuesday, adding 1.3% as traders pointed to reports that Germany was discussing 200 billion euros for an emergency defence fund.

Key developments that should provide more direction to U.S. markets later on Tuesday:

* US Conference Board’s February consumer confidence survey, Richmond Federal Reserve Feb business surveys, Dallas Fed Feb services survey

* Federal Reserve Vice Chair for Supervision Michael Barr, Dallas Fed President Lorie Logan, Richmond Fed chief Thomas Barkin all speak; European Central Bank board member Isabel Schnabel and Bank of England chief economist Huw Pill speak

* US corporate earnings: Home Depot, First Solar, Workday, Keurig Dr Pepper, Public Service Enterprise, Sempra, Pinnacle West, Intuit, Henry Schein, American Tower, Axon, Caesars Entertainment, Keysight, Extra Space Storage etc

* US Treasury sells $70 billion of 5-year notes

(Editing by Bernadette Baum)