Wall Street stocks extended their declines as investors assess policy expectations

Wall Street stocks turned lower on Thursday, extending losses as sentiment faltered after an upbeat start to the new month.

The S&P 500 was down 0.7 percent by midday in New York after the broad index ended the previous session 0.2 percent lower, putting the brakes on the strongest two-day advance for US stocks in more than two years. The technology-heavy Nasdaq Composite was down 0.4 percent.

In Europe, the Stoxx 600 lost 0.6 percent after the regional gauge closed 1 percent lower on Wednesday.

stock They have sold off broadly in recent months, with last week capping the longest streak of quarterly losses since the 2008 financial crisis. As the US Federal Reserve and other central banks spin monetary policy nails to curb inflation, the prospect of higher borrowing costs has hurt corporate valuations.

At the same time, fears have intensified that the Federal Reserve and its peers will raise interest rates into a prolonged slowdown, squeezing demand to the point of triggering a global recession — and heightening the threat to corporate financial health.

Against this backdrop, investors have carefully scrutinized economic data releases for clues about the extent to which interest rate makers can raise borrowing costs in the face of waning growth.

Thursday’s report provided new numbers on the unemployment situation in the US, as jobless claims first came in at 219,000 for the week ending October 1 – higher than the expected 203,000 and up from 190,000 in the previous week.

That weaker-than-expected picture came hot on the heels of Tuesday’s disappointing release on job prospects in the world’s largest economy, which eased concerns about higher interest rates, which in turn sent stocks higher on Wall Street.

Current market pricing reflects expectations that the key Fed rate will peak at 4.5 percent in March 2023, down from estimates in late September of nearly 4.7 percent. The Fed’s current target range is between 3 percent and 3.25 percent after three additional consecutive large increases of 0.75 percentage points.

The widely-watched monthly jobs report is due from the US Department of Labor on Friday. The temperature of the US job market is seen as a major influence on the Fed’s decision-making process, with signs of easing inspiring hope that the central bank will act less actively to contain inflation.

Government debt markets came under pressure on Thursday after days of sharp volatility. The yield on the 10-year US Treasury added 0.05 percentage point to 3.81 percent, while the yield on the two-year policy-sensitive Treasury rose 0.07 percentage point to 4.22 percent.

The moves were more pronounced in British bonds, where the 10-year British Treasury yield added 0.13 percentage point to 4.17 per cent as its price fell. Gold markets last week suffered a crunch as the new British government’s “mini” budget raised concerns about how much borrowing would be needed to fund its broad tax cuts.

In currencies, the dollar added 1.1 percent against a basket of six peers, extending gains from the previous session. Sterling fell 1.8 percent to $1.112 against the dollar, but continued to trade above the record low of $1,035 it had fallen to after British Finance Minister Kwasi Quarting revealed his financial plans on September 23.

“[We] “I think it’s too early to announce a peak in Fed tightening or a top in the dollar,” said Mark Heffel of UBS. “The number of job vacancies in the US is still much higher than those out of work, while the latest indicator of core personal consumption spending shows that inflation remains high.”

Federal Reserve officials, including Chairman Jerome Powell, stressed that the job of the central bank is not yet over.

Leave a Comment