US stocks fell as concern over an economic slowdown and prospects higher interest rates weighed on risk sentiment. Treasuries declined, sending yields higher across the curve.
(Bloomberg) — US stocks fell as concern over an economic slowdown and prospects higher interest rates weighed on risk sentiment. Treasuries declined, sending yields higher across the curve.
The S&P 500 Index dropped for a third day, testing the 3,900 level after the benchmark’s biggest selloff in a month Wednesday. The tech-heavy Nasdaq 100 fell as much as 1.1%. Treasuries retreated with the 10-year yield up 3 basis points, and the euro traded firmer after the head of the European Central Bank reaffirmed her aggressive stance.
On the earnings front, Procter & Gamble Co. slid after reporting shrinking sales volume. Alcoa Corp. fell after saying aluminum shipments will be weaker than anticipated this year. Discover Financial Services sank after the credit-card company warned write-off rates may double this year.
A rally driven by optimism over China’s economic reopening has fizzled as recent data signal a slowdown. Reports from the US this week showed declines in consumer demand and business investment, boosting the probability of a recession in the world’s largest economy. That, however, didn’t deter Federal Reserve officials from reaffirming the need for tighter monetary policy.
America First Becomes America Last in Great Market Reversal
Data was mixed Thursday, with new US home construction declining for a fourth-straight month in December. Applications for US unemployment benefits unexpectedly fell last week, sliding to the lowest level since September and underscoring a strong jobs market.
In the US Wednesday, releases showed producer prices and retail sales fell, while business equipment production slumped. A decline in factory output wrapped up the weakest quarter for manufacturing since the onset of the pandemic. Prominent Fed hawks Wednesday repeated calls for higher rates.
“Wage growth has slowed, and broad data is weakening, but Fed officials (at least the ones that have spoken so far) are clearly reluctant to let financial conditions ease,” writes Dennis DeBusschere, of 22V Research. “The hyper focus on anchoring financial conditions will change as inflation continues to move lower/data weakens, but there are not enough data points for the Fed to be comfortable with that call yet.”
On Thursday, Boston Fed President Susan Collins, who does not vote on policy this year, said she favors a more moderate pace of interest-rate increases. Fed Governor Lael Brainard, a voting member, is scheduled to speak later Thursday.
Key events this week:
- ECB account of its December policy meeting and President Christine Lagarde on a panel in Davos, Thursday
- Fed speakers include Susan Collins and John Williams, Thursday
- Japan CPI, Friday
- China loan prime rates, Friday
- US existing home sales, Friday
- IMF’s Kristalina Georgieva and ECB’s Lagarde speak in Davos, Friday
Here are some of the main market moves:
Stocks
- The S&P 500 fell 0.7% as of 10:41 a.m. New York time
- The Nasdaq 100 fell 0.8%
- The Dow Jones Industrial Average fell 0.7%
- The Stoxx Europe 600 fell 1.2%
- The MSCI World index fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was unchanged at $1.0794
- The British pound was little changed at $1.2345
- The Japanese yen rose 0.3% to 128.57 per dollar
Cryptocurrencies
- Bitcoin rose 0.7% to $20,920.03
- Ether rose 0.7% to $1,538.22
Bonds
- The yield on 10-year Treasuries advanced three basis points to 3.40%
- Germany’s 10-year yield advanced three basis points to 2.05%
- Britain’s 10-year yield was little changed at 3.31%
Commodities
- West Texas Intermediate crude rose 1.2% to $80.42 a barrel
- Gold futures rose 0.8% to $1,923.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Richard Henderson, Denitsa Tsekova, Srinivasan Sivabalan and Emily Graffeo.
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