Stocks fall, Argentina peso rises with US Treasury move

By Caroline Valetkevitch

NEW YORK (Reuters) -Major stock indexes eased on Thursday, while the dollar climbed to its highest level against the Japanese yen since mid-February as the newly elected leader of Japan's ruling party failed to boost market confidence about the currency's direction.

Argentina's international dollar bonds rallied and the local peso strengthened late on Thursday after direct participation from the U.S. Treasury in the foreign exchange market.

U.S. Treasury Secretary Scott Bessent made the announcement after the market closed, as part of previously pledged support for Argentine President Javier Milei's reform programs.

All three of the main U.S. stock indexes ended lower, and European stocks finished in the red as well. Stocks have been mostly rising in recent sessions despite an ongoing U.S. government shutdown and political risk in Japan and France that has made investors nervous.  

Oil prices fell as investors weighed a ceasefire deal in Gaza that could ease Middle East tensions against stalled peace talks in Ukraine, while spot gold drifted lower after safe-haven demand drove the metal above $4,000 an ounce for the first time this week. 

In Japan, Sanae Takaichi, the newly elected leader of the country's ruling party, said she did not want to trigger excessive declines in the Japanese currency, which led to a brief fall in the dollar versus the yen before the move reversed.

The yen has tumbled this week on concerns that Takaichi will introduce more fiscally expansive policies. The dollar was last up 0.27% at 153.09 yen after earlier reaching 153.23, the highest since February 13.

Argentina's 2035 bond rose 4.6 cents to trade at 60.58 cents on the dollar, while the peso closed at 1,425 per dollar, up 0.8% on the day, following sessions of managed weakness with intervention from the local Treasury.

"It makes sense for the Argentinian peso to jump as it has after a currency swap of $20 billion to alleviate the financial crisis Argentina is going through. And this goes along with the U.S. administration's policy of aiding those who are aligning with its agenda on trade, diplomacy, and other American interests," said Juan Perez, director of trading at Monex USA in Washington.

In the U.S., the federal government shutdown that began last week has left investors without key economic reports. 

Despite Thursday's weakness, the stock market remains buoyant, said Adam Sarhan, chief executive of 50 Park Investments in New York, adding that stocks could weaken if the government shutdown lasts for a substantial period of time.

"We're in a very strong bull market that refuses to fall in a meaningful fashion," he said. "I'm expecting a pullback at some point but for now the environment is very strong."

JPMorgan Chase CEO Jamie Dimon said there was a heightened risk of a significant correction in the U.S. stock market within the next six months to two years, citing factors including geopolitical tensions, government spending and remilitarization around the world.

The Dow Jones Industrial Average fell 243.36 points, or 0.52%, to 46,358.42, the S&P 500 fell 18.61 points, or 0.28%, to 6,735.11 and the Nasdaq Composite fell 18.75 points, or 0.08%, to 23,024.63.

Sunday will mark the current U.S. bull market's third anniversary. The benchmark S&P 500 touched the nadir of its current market cycle on October 12, 2022.

The pan-European STOXX 600 index ended 0.43% lower,dragged down by steep losses in HSBC and Ferrari.

The euro was down again against the dollar on Thursday. The currency has dropped since French Prime Minister Sebastien Lecornu tendered his resignation and that of his government on Monday. French President Emmanuel Macron’s office said on Wednesday he would appoint a new prime minister within 48 hours.  

The single currency was last down 0.61% at $1.1555 and reached $1.1545, the lowest since August 5. 

French bonds held on to gains from the day before on optimism the country can avoid a snap election. France's 10-year bond yield was 0.2% higher on the day at 3.529%. 

U.S. crude futures fell $1.04 to settle at $61.51 a barrel and Brent declined $1.03 to settle at $65.22.

Spot gold was last down 1.56% at $3,975.04. 

U.S. Treasury yields were little changed as the government shutdown dragged on. The 10-year yield was up marginally at 4.142%. 

(Additional reporting by Rodrigo Campos and Gertrude Chavez-Dreyfuss in New York and Elizabeth Howcroft in Paris; Editing by Nia Williams, Aurora Ellis and Jamie Freed)