US stocks and bonds slumped on Friday as traders mulled not one, but two more interest rate increases may be in store from the Federal Reserve this year.
(Bloomberg) — US stocks and bonds slumped on Friday as traders mulled not one, but two more interest rate increases may be in store from the Federal Reserve this year.
The S&P 500 slipped as policy-sensitive technology names dragged on the benchmark. The Nasdaq 100 slumped 0.5% as swaps traders start to price in a second rate increase in June, that’s in addition to a more widely expected one in May. The tech-heavy gauge is on track for its second weekly loss, the longest losing streak for the benchmark this year.
Treasury yields advanced, with the rate-sensitive two-year segment moving more than 10 basis points and topping 4% after a measure of March retail sales showed core readings declined less than estimated. Meanwhile, a Bloomberg gauge of the dollar resumed its climb while gold futures tumbled.
Equities were whipsawed after Federal Reserve Governor Christopher Waller said he favored more policy tightening in the central bank’s battle with inflation.
“The problem for many investors right now is that it’s still possible to construct fairly divergent narratives about the economy depending on which series you look at,” wrote a Deutsche Bank team led by Henry Allen. “For instance, yield curves have inverted, temporary jobs are declining, and on previous occasions when the Fed have hiked this fast and this quickly, a recession has followed shortly afterwards.”
On the other hand, the bank’s strategists said “you could point to unemployment around its lowest in decades, a high level of vacancies by historic standards, financial markets that have mostly shrugged off the SVB-related turmoil by now, along with growing signs that inflation is softening and the Fed are nearing a pause in their rate hikes.”
Financial stocks were the only sector advancing after JPMorgan Chase & Co. and Citigroup Inc. kicked off a busy earnings season. Assurances about the sector’s health is driving other big banks higher though they may get more scrutiny than usual given the failures in March of three smaller US lenders.
“We started the year off with pretty solid data. Now we’re getting a payback into March,” Ethan Harris, head of global economic research at BofA Securities told Bloomberg Television. “And so the question is: is this the beginning of that slide into recession? I’m leaning in that direction. I think that there’s some fundamental weakening going in the economy.”
Shares in Boeing Co. fell around as much as 7.2% after the firm said it was pausing deliveries of some 737 Max jets to address a production issue on some aircraft.
In commodities, crude headed for a fourth week of gains amid signs of a tightening global market.
Some of the main moves in the market:
Stocks
- The S&P 500 fell 0.4% as of 10:56 a.m. New York time
- The Nasdaq 100 fell 0.6%
- The Dow Jones Industrial Average fell 0.6%
- The Stoxx Europe 600 rose 0.5%
- The MSCI World index fell 0.2%
Currencies
- The Bloomberg Dollar Spot Index rose 0.4%
- The euro fell 0.4% to $1.1003
- The British pound fell 0.7% to $1.2436
- The Japanese yen fell 0.7% to 133.46 per dollar
Cryptocurrencies
- Bitcoin rose 1% to $30,573.96
- Ether rose 4.1% to $2,091.69
Bonds
- The yield on 10-year Treasuries advanced six basis points to 3.50%
- Germany’s 10-year yield advanced five basis points to 2.42%
- Britain’s 10-year yield advanced six basis points to 3.63%
Commodities
- West Texas Intermediate crude was little changed
- Gold futures fell 1.9% to $2,016.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Cecile Gutscher and Edward Bolingbroke.
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