US stocks declined and the dollar surged as Federal Reserve officials hammered home their resolve to remain persistent in their fight against inflation and warned of more pain to come.
(Bloomberg) — US stocks declined and the dollar surged as Federal Reserve officials hammered home their resolve to remain persistent in their fight against inflation and warned of more pain to come.
The S&P 500 and the tech-heavy Nasdaq 100 slumped. US 10-year Treasury yields rose after St. Louis Fed President James Bullard became the latest policy maker to flag that interest rate rises had further to rise. Rates might need to rise to a 5%-7% range, Bullard said on Thursday while also flagging the risk of further financial stress.
Bullard’s comments came a day after San Francisco Fed President Mary Daly said a pause in rate hikes was “off the table.” With inflation only starting to ease after hitting decades-high levels, and a gauge of US retail sales increasing at the fastest pace in eight months, the message from Fed speakers is that they have further to go to extinguish prices pressures. Fresh data showing weekly jobless claims came in below the forecast in a Bloomberg survey further underscored the strength of the labor market.
“In a different world, low inflation, steady jobless claims and a solid labor market would be good news,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “Instead, steady labor-market conditions against a backdrop of persistent inflation raises the stakes for the Fed.”
Earnings beats from tech and consumer-facing companies did little to help sentiment. Nvidia Corp. posted quarterly sales that topped analysts’ estimates while Cisco Systems Inc. gave a bullish revenue forecast. Macy’s Inc., meanwhile, climbed as it succeeded in bringing in shoppers despte a trend away from discretionary purchases as inflation persists.
Prices for growth-sensitive oil and copper extended losses on signs of a dimming demand outlook. European Central Bank policy makers too are said to be mulling a smaller 50 basis-point rate hike next month, signaling their concern for the economy and pushing the euro lower.
The pound dropped as Chancellor Jeremy Hunt outlined a £55 billion ($65 billion) package of tax rises and spending cuts even as the economy slid into recession. Gilt yields rose.
Key events this week:
- Fed’s Neel Kashkari, Loretta Mester speak, Thursday
- US Conference Board leading index, existing home sales, Friday
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1% as of 10:40 a.m. New York time
- The Nasdaq 100 fell 0.8%
- The Dow Jones Industrial Average fell 0.6%
- The Stoxx Europe 600 fell 0.5%
- The MSCI World index fell 0.8%
Currencies
- The Bloomberg Dollar Spot Index rose 0.7%
- The euro fell 0.6% to $1.0331
- The British pound fell 1% to $1.1789
- The Japanese yen fell 0.8% to 140.59 per dollar
Cryptocurrencies
- Bitcoin rose 0.6% to $16,627.51
- Ether rose 0.3% to $1,208.83
Bonds
- The yield on 10-year Treasuries advanced 10 basis points to 3.79%
- Germany’s 10-year yield advanced four basis points to 2.04%
- Britain’s 10-year yield advanced seven basis points to 3.22%
Commodities
- West Texas Intermediate crude fell 2.1% to $83.78 a barrel
- Gold futures fell 0.6% to $1,764.60 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sujata Rao.
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