US stocks fall as yields rise, Fed in focus

NEW YORK (Reuters) – Wall Street indexes fell sharply after a choppy start to Thursday’s session, while bond yields rose as investors digested economic data that did not provide the Federal Reserve with enough reason to ease the aggressive rate hike cycle.

Oil futures fell more than 3% on concerns about demand and after an initial agreement that would avert a US rail strike, in addition to the continued strength of the US dollar with expectations of a significant hike in US interest rates. Read more

Economic data showed that US retail sales unexpectedly rebounded in August as Americans ramped up their car purchases and dined more while benefiting from lower gasoline prices. But the data for July was revised down to show retail sales declining rather than flat as previously reported.

Separately, the Labor Department said initial claims for state unemployment benefits fell for the week ending September 10 to their lowest level since the end of May. Read more

Investors are widely anticipating a rate hike after next week’s Federal Open Market Committee meeting, but are anxiously awaiting hints from Federal Reserve Chairman Jerome Powell about future policy moves, said Quincy Crosby, chief global strategist at LPL Financial.

“The market remains volatile knowing there is a Federal Reserve meeting next week. Although participants agree that it will be a 75 basis point rate hike, what the statement adds to the previous comment and what Chairman Powell said in his press conference,” Crosby said They are worried.

Dow Jones Industrial Average (.DJI) It fell 173.07 points, or 0.56%, to 30,962.02 points. Standard & Poor’s 500 (.SPX) It lost 44.69 points, or 1.13%, to 3,901.32 points, and the Nasdaq Composite (nineteenth) It fell 167.32 points, or 1.43%, to 11,552.36 points.

MSCI’s benchmark for stocks worldwide (.MIWD00000PUS) It fell 0.96%, while emerging market stocks fell (MSCIEF) He lost 0.57%.

Stocks, bonds and currencies showed Thursday that the market is “increasingly understanding that the Fed will rise more strongly next week,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

In a special reference to the still-strong labor market, Ladner said, “The economic numbers released today are constraining the situation.”

Treasury yields surged as the two-year hit new highs in 15 years, after retail sales and jobless claims data showed a resilient economy giving the Federal Reserve ample room to aggressively raise interest rates.

It also already points to a recession warning that the inverted yield curve – the gap between 2-year and 10-year Treasury yields – has widened further to -41.4 basis points, compared to -13.0 basis points a week ago.

The benchmark 10-year note rose 4.5 basis points to 3.457% from 3.412% late Wednesday. The price of the 30-year bond has fallen in the past 5/32 to 3.4779% from 3.469%. The price of the 2-year bond has fallen in the past 5/32 to 3.8646% from 3.782%.

“In this vicious cycle where data continues to hold, it would imply that the Federal Reserve will likely stay on track and continue to tighten policy,” said Subhadra Rajappa, head of US interest rate strategy at Societe Generale in New York.

Investors’ mood was also clouded on Thursday by the World Bank’s assessment that the world could be headed for a global recession as central banks around the world raise interest rates simultaneously to combat persistent inflation. Read more

In currencies, the dollar rose slightly against the yen while the Swiss franc hit its highest level against the euro since 2015. Read more

The dollar index, which measures the greenback against a basket of major currencies, rose 0.091%, with the euro advancing 0.18% to $0.9995.

The Japanese yen was down 0.19% against the dollar at 143.44 per dollar, while the British pound was last traded at $1.1469, down 0.57% on the day.

Prior to the temporary labor agreement, fears of a US rail strike had supported oil prices due to supply concerns on Wednesday. In addition, the International Energy Agency (IEA) said this week that oil demand growth will stall in the fourth quarter.

US crude closed down 3.82% to $85.10 a barrel while Brent crude closed at $90.84, down 3.46% on the day.

Gold fell to its lowest level since April 2021, dragged down by rising US Treasury yields and a firm dollar, as bets for another big Fed rate hike eroded the allure of bullion.

Spot gold fell 1.9% to $1,664.46 an ounce. US gold futures fell 2.02% to $1,662.30 an ounce.

Additional reporting by Herbert Lash in New York, Mark Jones in London, Stefano Ribaudo in Milan, Tom Westbrook in Singapore, Wayne Cole in Sydney; Editing by Kirsten Donovan and Jonathan Otis

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