Stocks and oil under pressure as market predicts US rate rise
Stocks mixed, oil prices fell and the dollar edged higher on Thursday, as investors questioned what hot inflation figures released on Wednesday would mean for rate hikes US when the US Federal Reserve meets later this month.
Wall Street’s S&P 500 fell 0.4%, extending losses from the previous session, while the tech-heavy Nasdaq Composite was flat on the day. In Europe, the Stoxx 600 in the region closed down 1.5%.
Last month, U.S. consumer prices rose the fastest in 40 years, a report from the Bureau of Labor Statistics showed Wednesday, with the annual inflation rate topping economists’ forecasts of 9 percent. ,first%.
Initial data boosted expectations of a much larger rate hike from the Fed at its July meeting, but those forecasts faded in afternoon trading after Fed governor Christopher Waller on Thursday. reiterate his support to increase three-quarters of a percentage point.
In the wake of Waller’s comments, futures market investors had priced in more than an 80 percent chance the Fed would deliver its first one percentage point rate hike since the central bank repeatedly began using it. used the federal funds rate as its primary policy tool at first. The 1990s. As of Thursday afternoon, those expectations were around 40%.
Falling interest rate hike expectations dragged yields on the two-year Treasury note slightly lower, down 0.01 percentage points to 3.13 percent. Yields, changed by policy expectations, on Wednesday rose to their highest level since mid-June.
Investors are still pricing in a massive 0.75 percentage point gain, which could slow the economy enough to push it into a recession.
“This is not just about inflation,” said Salman Ahmed, global head of strategic and macro allocation at Fidelity International. “There is a significant slowdown in the pipeline. We expect this growth downturn to turn into a recession.”
Concerns about the health of the global economy have led investors to flock to the dollar, traditionally seen as a haven in times of stress. The dollar index, which measures the US currency against a basket of six other currencies, rose 0.3%.
That added to the pain for the euro, as the euro fell 0.3% to trade just above $1. The common currency weakened on Wednesday to par with the greenback for the first time in 20 years. The Japanese yen also lost more than 1% to a 24-year low of 139.39 yen.
Recession fears weighed on oil prices earlier in the day, with Brent falling 5.1% to $94.50 a barrel – bringing the international oil benchmark back to levels seen before Russia. invaded Ukraine at the end of February. But Brent later reversed much of that drop to drop 0.47% on the day at $99.10.