Wall Street flips to losses after spending bill passes House raising anxiety over US debt

Washington, May 22 (AP) Bond yields inched higher and Wall Street flipped from small gains to losses before the opening bell on Thursday after rising UK debt sank markets on the previous day.

Futures for the Dow Jones Industrial Average fell 0.5 per cent in premarket trading, while futures for the S and P 500 and Nasdaq each slid 0.3 per cent.

US markets are also reacting to the passage early in the House on Thursday of the Republicans' multi-trillion-dollar spending bill, which aims to extend some USD 4.5 trillion in tax breaks from President Donald Trump's first term in 2017 while adding others.

The bill, which has stiffer requirements for Medicaid and other programs, is expected to undergo some changes when it gets to the Senate for a vote.

The legislation also includes a speedier rollback of production tax credits for clean electricity projects, which sent shares of solar companies tumbling. First Solar slid more than 7 per cent, while Sunrun lost nearly one-third of its value. Energy technology company Enphase Energy fell 15 per cent.

Health care stocks were also falling early Thursday after the Centres for Medicare and Medicaid Services said it was immediately expanding its auditing of Medicare Advantage plans. UnitedHealth Group fell 3.5 per cent and Humana was down 4.8 per cent.

US markets are coming off significant losses from a day earlier over concerns about the cost of the bill and the US's already mounting debt. The nonpartisan Congressional Budget Office said the tax provisions would increase federal deficits by USD 3.8 trillion over the decade.

Treasury yields ticked up on Thursday after spiking the day before when the US government released the results for its latest auction of 20-year bonds. Such bonds help to pay government bills and the auction had to offer a yield of more than 5 per cent to attract enough buyers.

The yield on the 10-year was at 4.62 per cent early Thursday, up from 4.51 per cent two days ago, a significant move in the bond market.

Rising yields for US Treasury bonds are a canary in the coal mine, Stephen Innes of SPI Asset Management said in a commentary.

“The US still has the biggest markets, the deepest liquidity, and the dollar's inertia working in its favor. But even inertia can't outrun compound interest and structural deficits forever,” he wrote.

The declining US dollar weighed on Asian regional markets, according to some analysts, because some Asian nations have significant holdings in dollars. It also affects Asian exporters, such as Japanese automakers and electronics companies, by reducing the value of their overseas earnings when they are converted into yen.

In currency trading, the US dollar fell to 143.35 Japanese yen from 143.68 yen. It had been trading at 150 yen levels a year ago. The euro slid to USD 1.1312.

Japan's benchmark Nikkei 225 shed 0.8 per cent to finish at 36,985.87.

Hong Kong's Hang Seng lost 1.2 per cent to 23,544.31, while the Shanghai Composite edged down 0.2 per cent to 3,380.19.

Australia's S and P/ASX 200 slipped 0.5 per cent to 8,348.70. South Korea's Kospi dropped 1.2 per cent to 2,593.67.

In Europe at midday, France's CAC 40 slipped 1.1 per cent, while Germany's DAX declined 1 per cent. Britain's FTSE 100 fell 0.8 per cent.

The price of oil fell on media reports that OPEC+ was considering another production increase. Benchmark US crude lost 94 cents to USD 60.63 a barrel. Brent crude, the international standard, fell 99 cents to USD 63.92 a barrel. (AP) PY PY

Source: PTI