FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 29, 2021. REUTERS/Brendan McDermid
January 6, 2022
By Lawrence Delevingne
BOSTON (Reuters) – Wall Street’s headache over the potential of a relatively fast pullback from stimulus by the U.S. Federal Reserve lingered Thursday morning as some stocks sold off again and government bond yields kept marching higher.
The Dow Jones Industrial Average fell 114.14 points, or 0.31%, to 36,292.97, the S&P 500 gained 7.21 points, or 0.15%, to 4,707.79 and the Nasdaq Composite added 56.92 points, or 0.38%, to 15,157.09.
Stocks fell sharply in Asia and Europe too, with Wall Street’s technology-heavy Nasdaq having plunged more than 3% the previous day.
Benchmark 10-year yields rose to 1.7530%, the highest since March 2021, and were last up slightly on the day to 1.7369%. U.S. 2-year yields, which track near-term rate expectations, rose to the highest since early March 2020, the start of the global spread of COVID-19, at 0.87%.
Minutes from the Fed’s December meeting had shown that a tight jobs market and unrelenting inflation could require the U.S. central bank to raise rates sooner than expected and begin reducing its overall asset holdings.
“This morning, we’re seeing a continuation of the activity to start 2022: long bond yields heading higher and higher growth/technology names selling off in response,” Ross Mayfield, Baird’s investment strategy analyst, said in an email.
“This makes sense, as transitioning to tighter monetary policy would necessarily have a negative impact on higher-growth, richly valued, longer-duration equities.”
Adding to the worries on Thursday was data from the U.S. Labor Department https://www.reuters.com/markets/us/us-weekly-jobless-claims-increase-moderately-2022-01-06 showing an increase in the number of Americans filing new claims for unemployment benefits last week, and the Institute for Supply Management noting that non-manufacturing activity fell in December.
Investors will now look ahead to a key U.S. jobs report on Friday, which will follow new euro zone inflation data that the European Central Bank will watch closely.
Global money markets are now pricing in three full Fed interest rate hikes in 2022, with the first expected as early as March. [/FRX]
Treasury yields rose along the curve on Thursday, as traders narrowed the odds on an early hike and prepared for the possibility of the Fed cutting its bond holdings.
In Europe, 10-year German Bund yields, which rolled over into a new benchmark, rose to -0.05%, the highest level since May 2019, Refinitiv data showed.
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