US Stocks Fall as Yields Rise, Fed in the Crosshairs

NEW YORK, Sept 15 (Reuters) – Wall Street indices were firmly in the red after a choppy start to the session on Thursday, while bond yields rose as investors digested economic data provided to the Federal Reserve little reason to ease its aggressive interest rate hike cycle.

Oil futures fell more than 3% on demand concerns and after a tentative deal that would avert a US rail strike. read more

Economic data showed that US retail sales unexpectedly rebounded in August as Americans increased motor vehicle purchases and dined out more while taking advantage of lower gasoline prices. But data for July was revised down to show that retail sales declined rather than holding steady as previously reported.

Separately, the Labor Department said initial claims for state jobless benefits fell during the week ending Sept. 1. 10 to the lowest level since the end of May. read more

Investors expect an aggressive rate hike after the FOMC meeting next week, but nervously await suggestions from Fed Chairman Jerome Powell on future rate moves. politics, said Quincy Krosby, chief global strategist at LPL Financial.

“The market remains choppy knowing there is a Fed meeting next week. While participants agree it will be a 75 basis point rate hike, it is what the statement adds to previous comments and what it says Chairman Powell at his news conference” what you have are worried about, Krosby said.

The Dow Jones Industrial Average (.DJI) it fell 173.07 points, or 0.56%, to 30,962.02; the S&P 500 (.SPX) lost 44.69 points, or 1.13%, to 3,901.32 and the Nasdaq Composite (.IXIC) it fell 167.32 points, or 1.43%, to 11,552.36.

MSCI Stock Indicator Worldwide (.MIWD00000PUS) lost 0.96%, while emerging market stocks (.MSCIEF) lost 0.57%.

Stocks, bonds and currencies showed a market on Thursday “increasingly understanding that the Fed is going to hike more aggressively next week,” said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.

Referring particularly to the still-strong job market, Ladner said “the economic numbers released today are tying things up.”

Treasury yields rose over the two years to new 15-year highs, after data on retail sales and jobless claims showed a resilient economy giving the Fed ample room to aggressively raise interest rates. .

Also already signaling a recession warning, the inverted yield curve, the gap between 2-year and 10-year Treasury yields, widened further to -41.4 basis points, compared to -13.0 bps. a week ago.

Benchmark 10-year notes rose 4.5 basis points to 3.457%, from 3.412% late on Wednesday. The 30-year note last fell 5/32 in price to yield 3.4779%, from 3.469%. The 2-year note last fell 5/32 in price to yield 3.8646%, from 3.782%.

“In this vicious circle where data continues to be resilient, that would imply that the Fed would probably stay the course and continue to tighten policy,” said Subadra Rajappa, head of US rates strategy at Societe Generale in New York. .

Also clouding investor sentiment on Thursday was the World Bank’s assessment that the world could be on the verge of a global recession as central banks around the world simultaneously raise interest rates to combat persistent inflation. read more

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

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

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

Prior to the tentative labor deal, fears of a US rail workers strike had supported oil prices on supply concerns on Wednesday. Additionally, the International Energy Agency (IEA) said this week that oil demand growth would stall in the fourth quarter.

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

Gold fell to its lowest level since April 2021, hit by soaring US Treasury yields and a firm dollar, as bets of another sharp Fed rate hike eroded gold’s appeal.

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, Marc Jones in London, Stefano Rebaudo in Milan, Tom Westbrook in Singapore, and Wayne Cole in Sydney; Edited by Kirsten Donovan and Jonathan Oatis

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