NEW YORK, Oct 19 (Reuters) – Wall Street faltered and
10-year U.S. Treasury yields reached a 16-year high after U.S.
Federal Reserve Chairman Jerome Powell said that additional rate
hikes could be warranted in view of economic resiliency and
labor market tightness.
All three major U.S. stock indexes turned lower as Powell’s
remarks appeared to push back against market expectations that
the central bank’s rate-hiking cycle had run its course.
“The lack of clarity is causing a reduction in confidence,”
said Sam Stovall, chief investment strategist of CFRA Research
in New York. “And there’s really not much that the Fed’s going
to say that’s going to change or clarify things.”
“Powell’s comments today indicated that there’s more to be
done,” Stovall added. The Fed “won’t start to cut rates until
the beginning of the second half of next year at the earliest.”
Exacerbating worries over higher-for-longer interest rates,
benchmark Treasury yields brushed against the 5% level.
“The pressure (rising yields) have put on mortgage rates, as
well as the concern as to what it might do for consumer
spending,” has investors spooked, Stovall said. “I think
investors are worried that higher rates will force a recession.”
Third-quarter reporting season has hit full stride. A mixed
bag of earnings from high-profile companies such as Tesla Inc
and Netflix Inc has sent market participants
in search of an emerging common theme.
The Israel-Hamas conflict continued with air strikes
pounding Gaza. British Prime Minister Rishi Sunak on Thursday
followed U.S. President Joe Biden’s visit to the region to
bolster support for Israel’s fight against Hamas militants and
help find a diplomatic solution to the conflict.
On the economic front, existing-home sales dropped to a
13-year low, jobless claims dipped to their lowest level since
January, and the Leading Economic index notched its 18th
straight monthly decline.
The Dow Jones Industrial Average fell 190.23 points,
or 0.57%, to 33,474.85, the S&P 500 lost 32.03 points, or
0.74%, to 4,282.57, and the Nasdaq Composite dropped
115.51 points, or 0.87%, to 13,198.79.
European shares tumbled 1.2% to close at a two-week low as a
string of downbeat earnings exacerbated investors’ risk-averse
mood, driven by worries over the escalating tensions in the
Middle East and uncertainties over interest rates.
The pan-European STOXX 600 index lost 1.19% and
MSCI’s gauge of stocks across the globe shed
0.89%.
Emerging market stocks lost 1.23%. MSCI’s broadest index of
Asia-Pacific shares outside Japan closed 1.48%
lower, while Japan’s Nikkei lost 1.91%.
U.S. Treasury yields surged, with the 10-year brushing
against the 5% threshold as the Fed’s Powell warned that
additional monetary policy tightening could be in the cards.
Benchmark 10-year notes last fell 20/32 in price
to yield 4.9877%, from 4.902% late on Wednesday.
The 30-year bond last fell 47/32 in price to
yield 5.1007%, from 4.994% late on Wednesday.
The greenback weakened against a basket of world currencies
as benchmark Treasury yields crept higher and gold surged.
The dollar index fell 0.35%, with the euro up
0.46% to $1.0583.
The Japanese yen strengthened 0.06% versus the greenback at
149.86 per dollar, while sterling was last trading at
$1.2149, up 0.07% on the day.
Crude prices advanced amid supply concerns that could arise
should the Israel-Hamas conflict escalate.
U.S. crude rose 1.19% to settle at $89.37 per
barrel, while Brent settled at $92.38 per barrel, up
0.96% on the day.
Gold jumped in opposition to the dollar’s weakness as
mounting Middle East turmoil sparked safe-haven demand.
Spot gold added 1.3% to $1,972.43 an ounce.
(Reporting by Stephen Culp; Additional reporting by Amanda
Cooper in London; Editing by Bernadette Baum and Leslie Adler)
