Markets

Stocks fall, returns rise; concerns about the economic slowdown are increasing

  • Wall Street stocks end down
  • Dollar down vs. Yen
  • Oil prices are rising

NEW YORK, Jan 19 (Reuters) – World shares fell on Thursday and benchmark U.S. 10-year Treasury yields rose from four-month lows as concerns grew that an aggressive stance by central banks could push the global economy into a slowdown.

Wall Street stocks ended lower on recession worries, while European shares posted their biggest daily selloff of the year and a global stock index posted a third straight day of declines.

Investors are concerned that the U.S. central bank could “overhype into a slowing environment,” said Ross Mayfield, investment strategy analyst at Baird.

“This week the sentiment has become a bit more risk-off,” he said. “The fear of recession is starting to become front and center.”

An American report showed number of Americans filings for unemployment benefits fell unexpectedly last week, pointing to another month of solid job growth and a continued tight labor market.

The Fed will likely have to raise interest rates to “just above” 5% and keep them there for a while, Boston Fed President Susan Collins said. Other Fed officials have also suggested the need for a hawkish stance to combat inflation.

Earlier, European Central Bank President Christine Lagarde pushed eurozone bond yields up slightly by telling the World Economic Forum’s Davos gathering that the bank would stay the course with rate hikes.

Dow Jones Industrial Average (.DJI) fell 252.4 points, or 0.76%, to 33,044.56, the S&P 500 (.SPX) lost 30.01 points or 0.76% to 3,898.85 and the Nasdaq Composite (.IXIC) fell 104.74 points, or 0.96%, to 10,852.27.

The pan-European STOXX 600 index (.STOXX) lost 1.55% and MSCI’s benchmark for stocks across the globe (.MIWD00000PUS) fall 0.94 per cent

Investors digested several quarterly earnings reports. Procter & Gamble (PG.N) raised its full-year sales forecast and said it plans to continue raising prices.

Also Netflix (NFLX.O) shares rose more than 6% in after-hours trading. Co-founder Reed Hastings announced he will step down as CEO, while the company also released quarterly results.

Benchmark 10-year US Treasury yields fell from four-month lows as they neared a key technical level, and the recent bond rally appeared overdone in the short term.

10-year yields were last at 3.397%, after earlier falling to 3.321%, the lowest since September 13. The 200-day moving average was at 3.292%. Rates have fallen from 3.905% at the end of the year and from a 15-year high of 4.338% on 21 October.

In currency markets, the dollar was down 0.4% in afternoon trade against the yen at 128.455 yen, a day after the Bank of Japan decided to end its ultra-loose monetary policy.

In other data, total U.S. housing starts fell 1.4% to a rate of 1.382 million units last month. Building permits fell 1.6% to a rate of 1.330 million units.

USA the government hit its mark $31.4 trillion borrowing limit, with the Republican-controlled House of Representatives in a battle with President Joe Biden’s Democrats to lift the cap. If the problem is not solved, it could lead to a financial crisis in a few months.

Treasury Secretary Janet Yellen informed congressional leaders that her department had begun using extraordinary liquidity management measures that could stave off defaults until June 5.

World stocks strong start to 2023

In the energy market, oil prices rose 1%, extending a recent rally amid rising Chinese demand.

Brent crude futures rose $1.18, or 1.4%, to settle at $86.16 a barrel. Those were the highest closing levels for both contracts since December 1.

Reporting by Caroline Valetkevitch in New York; additional reporting by Gertrude Chavez-Dreyfuss in New York and Marc Jones in London; editing by John Stonestreet, Alex Richardson and David Gregorio

Our standards: Thomson Reuters Trust Principles.

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