US stocks fall, bond yields rise on mounting concerns

A broker looks at a graph on his computer screen at ICAP’s trading floor in London, Britain January 3, 2018. REUTERS/Simon Dawson

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  • Wall Street indices close lower, bond yields rise
  • The euro falls while the dollar rises
  • Gold falls slightly, oil futures rise

April 14 (Reuters) – Wall Street stocks ended lower, while bond yields and the dollar rose on Thursday, as investors worried about the possibility of aggressive US policy tightening while other central banks around the world reduced support.

The benchmark yield for 10-year US Treasuries rose after two days of declines following a spate of US economic data including retail sales and jobless claims and the European Central Bank’s announcement of less aggressive than expected tightening plans.

New York Fed President John Williams said on Thursday the Federal Reserve should reasonably consider a half a percentage point rate hike at its next meeting in May, in what was taken as another sign that even more cautious policymakers are on the move higher rates on board are hikes. Continue reading

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This came after the ECB announced it would be trimming bond purchases — known as quantitative easing — this quarter, then ending them sometime in the third quarter. Continue reading

Investors also saw sharp rate hikes by the Reserve Bank of New Zealand and the Bank of Canada and a surprise rate hike by the Bank of Korea, as well as monetary tightening by the Monetary Authority of Singapore.

Those moves all exacerbated the rise in bond yields and the fall in stock prices, according to Mona Mahajan, senior investment strategist at Edward Jones, who also noted Thursday’s data showed the Fed needed to act quickly.

“All systems are ready for the Fed to move quite aggressively,” Mahajan said. “In general, it’s a global fight to fight inflationary pressures.”

US stocks rose on Wednesday on hopes that gains could peak. But Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, saw Thursday’s trading as a sign that there was little conviction behind those hopes.

The Dow Jones Industrial Average (.DJI) fell 113.36 points, or 0.33%, to 34,451.23, during the S&P 500 (.SPX) lost 54 points or 1.21% to 4392.59 and the Nasdaq Composite (.IXIC) fell 292.51 points, or 2.14%, to 13,351.08.

Based on the pan-European STOXX 600 Index (.STOXX) rose 0.67% and the MSCI measure for stocks around the world (.MIWD00000PUS) 0.71% lost.

“Today is probably the right response,” said Sameer Samana, senior global market strategist at the Wells Fargo Investment Institute in St. Louis. “Until inflation is under control, it is not under control. There is too much uncertainty.”

Samana also pointed to the tone of the ECB’s comments about threats to growth going in the wrong direction and inflation risks “going up”.

Meanwhile, the euro plummeted to a two-year low against the dollar in forex trading as comments from ECB President Christine Lagarde were taken as a sign the bank was in no rush to hike interest rates. Continue reading

The dollar index rose 0.524%, while the euro fell 0.52% to $1.0828.

The Japanese yen weakened 0.21% against the greenback to 125.94 per dollar, while sterling was last traded at $1.3076, down 0.30% on the day.

Benchmark 10-year bonds were last down 36/32 in price to 2.8275% from 2.689% late Wednesday.

Along with measures from Seoul and Singapore, New Zealand’s central bank hiked interest rates by a whopping 50 basis points on Wednesday, the largest hike in over two decades. The Bank of Canada also hiked rates by the same level, making its biggest single move in more than two decades and announcing more rate hikes.

The rate hike cycle is off

Oil prices rose on Thursday after an early decline as investors covered short positions ahead of the long weekend and on news that the European Union could introduce a ban on Russian oil imports.0/R

US crude was up 2.02% at $106.36 a barrel and Brent was at $111.41, up 2.42% on the day.

Gold slipped Thursday after the dollar strengthened and yields rose as investors braced for US interest rate hikes, but Ukraine crisis-triggered safe-haven demand and rising inflation kept bullion on course for weekly gains . Continue reading

Spot gold was last down 0.3% to $1,971.40 an ounce.

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Additional reporting by Tom Wilson in London; Edited by Bernadette Baum, Susan Fenton, Cynthiaosterman and Sandra Maler

Our standards: The Thomson Reuters Trust Policy.

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