Stocks fall, dollar rises as investors worry about trade

NEW YORK (Reuters) - Wall Street equity indexes ended a volatile session lower on Monday while oil prices gave up early gains and the dollar rose as investors looked for safety ahead of U.S.-China trade talks.

FILE PHOTO: Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2019. REUTERS/Brendan McDermid

U.S. Treasury yields rose as $78 billion in note and bond supply slated for auction this week helped push prices lower after last week’s dramatic rise.

As deputy level U.S.-China trade talks kicked off on Monday, the White House confirmed that high-level talks involving Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin would start on Thursday.

Late in the session, Wall Street’s major indexes briefly turned higher after positive tweets about the trade talks. But they then sank again as hopes for progress faded.

Without a clear bet to make on the trade talks outcome, investors appeared to see the dollar as the safest place, according to Shawn Cruz, manager of trader strategy at TD Ameritrade in Jersey City, New Jersey.

“You can expect this (volatility) all week leading up to the discussions with China on trade. Markets are trying to front run the outcome,” said Cruz. “Bonds and stocks will be volatile this week. Investors don’t know one way or another what the outcome of trade discussions will be, so they’re moving out of both.”

The Dow Jones Industrial Average .DJI fell 95.7 points, or 0.36%, to 26,478.02, the S&P 500 .SPX lost 13.22 points, or 0.45%, to 2,938.79 and the Nasdaq Composite .IXIC dropped 26.18 points, or 0.33%, to 7,956.29.

The pan-European STOXX 600 index .STOXX rose 0.71% and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 0.19%.

Emerging market stocks lost 0.35%.

Oil prices settled slightly lower, paring early gains as hopes of a comprehensive U.S.-China trade deal faded and a new poll showed analysts expect U.S. crude oil inventories to have risen last week. Hopes of U.S.-China trade progress had helped lift oil prices earlier in the session. [O/R]

Brent Crude futures LCOc1settled down 2 cents at $58.35 and U.S. crude CLc1finished down 6 cents at $$52.75.

The dollar edged higher against a basket of major currencies, but Turkey’s lira slid to its lowest level against the dollar in more than a month after the White House said Ankara would soon launch unilateral military operations in northeast Syria.

The Turkish lira lost 2.45% versus the U.S. dollar at 5.84, its weakest in over a month. A move above 5.8577 would send the currency to its weakest since June.

U.S. President Donald Trump later threatened to “totally destroy and obliterate the Economy of Turkey” if Ankara does anything “off limits.”

The dollar index .DXY rose 0.17%, with the euro EUR= down 0.05% to $1.097.

The Japanese yen weakened 0.31% versus the greenback at 107.30 per dollar, while Sterling GBP= was last trading at $1.2294, down 0.30% on the day.

U.S. Treasury yields drifted higher, with benchmark 10-year notes US10YT=RR last down 14/32 in price to yield 1.5614%, from 1.514% late on Friday.

Spot gold XAU= dropped 0.8% to $1,492.26 an ounce. U.S. gold futures GCcv1 fell 0.98% to $1,491.40 an ounce.

Additional reporting by Rodrigo Campos in New York; Collin Eaton in Houston, Shreyashi Sanyal in Bengaluru and Saqib Iqbal Ahmed in New York; Editing by Dan Grebler and Nick Zieminski