US stocks shift into reverse gear as investors rotate away from risk

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Wall Street had a late-day change of heart on Wednesday, with investors rotating away from economically sensitive equity sectors and into perceived havens.

The S&P 500 shed gains of as much as 0.8 per cent, and recently traded lower by 0.2 per cent to 2,355, about thirty minutes before the closing bell rings in New York.

Investors’ reaction to minutes from the Federal Reserve’s March meeting were initially muted, but the response became more bearish as the day ticked on.

Shares in utilities companies, which are bond proxies that tend to shine during less certain economic times, led the way higher, rising by 0.3 per cent. Meanwhile, financials, which have soared since the November election amid expectations that the economy will brighten and rates will rise, pulled back by 0.5 per cent.

The performance marked a turnround from earlier, when financials were among the top performers and utilities lagged behind.

In what is perhaps a gloomy sign for stocks, some central bankers have begun to view US equity prices as “quite high”, compared with standard valuation measures, according to the March meeting minutes.

Goldman Sachs stock strategists had offered a similar view in a note to clients on Wednesday, saying that “US equities are very stretched relative to history across most valuation measures”.

Wednesday’s late-day shift from risk was also apparent in fixed income. The 10-year Treasury yield, which moves in the opposite direction of the note’s price, fell 2.7 basis points to 2.333 per cent, having risen as high as 2.382 per cent earlier.

The US dollar also gave up its gains, and recently traded flat against half-a-dozen world currencies. It had risen as much as 0.3 per cent earlier.

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