US stocks slide as yields rise, Fed in focus

NEW YORK, Sept 15 (Reuters) – Wall Street indexes were firmly in the red after a tumultuous start to Thursday’s session, while bond yields rose as investors digested economic data that provided little reason to ease the Federal Reserve’s cycle of aggressive rate hikes.

Oil futures fell more than 3% on demand concerns and a tentative deal to avert a US rail strike, as well as a continued strengthening of the dollar on expectations of a major rate hike. read more

U.S. retail sales unexpectedly rose again in August as Americans stepped up car purchases and dined out more, taking advantage of lower gasoline prices, economic data showed. But data for July was revised downward to show retail sales fell instead of flat as previously reported.

Separately, the Labor Department said initial claims for state jobless benefits fell for the week ending in September. 10 to its lowest level since late May. read more

Quincy Krosby, chief global strategist at LPL Financial, said investors expect an aggressive rate hike after next week’s Federal Open Market Committee (FOMC) meeting, but are nervously awaiting guidance from Fed Chairman Jerome Powell on future policy actions.

“The market remains volatile with the Fed meeting next week. While participants agreed it would be a 75 basis point rate hike, the statement adds to previous comments and Chairman Powell’s press conference.” They are worried, Crosby said.

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

MSCI’s worldwide stock size (.MIWD00000PUS) and emerging market stocks lost 0.96% (.MSCIEF) It lost 0.57%.

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

“The economic numbers released today are a nod to the situation,” Ladner said, noting the still-strong labor market in particular.

Treasury yields rose to two-year highs in 15 years after data on retail sales and jobless claims showed a solid economy that gave the Fed ample room to raise interest rates aggressively.

Also warning of an already inverted yield curve bearish signal – the gap between 2-year and 10-year Treasury yields – widened to -41.4 basis points from -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 was last down on 5/32, yielding 3.4779% from 3.469%. The 2-year note last fell on 5/32, yielding 3.8646% from 3.782%.

“In this bearish cycle where the data remains persistent, it probably means a Fed that will stay the course and continue to tighten policy,” said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.

Also weighing on investor sentiment on Thursday was the World Bank’s assessment that the world is heading for a global recession as central banks around the world simultaneously raise interest rates to fight persistent inflation. read more

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

The dollar index, which measures the exchange rate of the dollar against a basket of major currencies, increased by 0.091%, and the euro increased by 0.18% to 0.9995 dollars.

The Japanese yen weakened 0.19% to $143.44/dollar, while Sterling fell 0.57% to $1.1469 on the day.

Fears of a U.S. railroad strike ahead of a preliminary labor deal supported oil prices on Wednesday amid supply concerns. In addition, the International Energy Agency (IEA) said this week that oil demand growth will stop in the fourth quarter.

US crude oil fell by 3.82% to $85.10/barrel, while Brent oil fell by 3.46% to $90.84.

Gold fell to its lowest level since April 2021, hurt by higher U.S. Treasury yields and a strong dollar, as bets on another Fed rate hike undermined bullion’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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