US stocks extended declines as investors filtered through the latest batch of data for clues on Federal Reserve’s next move. Treasury yields rose and the dollar gained.
The S&P 500 fell to lows of the day, while the Nasdaq 100 led the drop sliding more than 1% amid declines in Microsoft Corp. and Apple Inc. Adobe Inc. tumbled after agreeing to buy software design startup Figma Inc. in a deal valued at about $20 billion. Treasury yields were higher across the board, with the the policy-sensitive two-year yield up six basis points at 3.85%.
The latest reports painted a mixed picture for the economy. Applications for US unemployment insurance fell for a fifth straight week, suggesting demand for workers remains healthy. Retail sales unexpectedly rose in August, but the data showed heavy downside revisions to the prior month’s number. Other data showed factory production rose slightly in August while total industrial production, including mining and utilities, fell.
The reports came after Tuesday’s consumer inflation jolt saw wagers for rate increases ratchet higher and stocks slump the most in two years. Swaps traders are currently pricing in a 75 basis point hike when the Fed meets next week, with some wagers appearing for a full-point move.
“Data in hand mean the Fed is most likely to raise the fed funds target three-quarters of a percent at its decision next week,” said Bill Adams, chief economist at Comerica Bank. “A hike of a full percentage point is the month’s dark horse candidate.”
The continued rise in rate-sensitive Treasuries deepened the curve inversion — a harbinger for a looming recession — to a level unseen this century.
“This is a market waiting for the next catalyst,” Fiona Cincotta, senior financial markets analyst at City Index, said by phone. “What we saw in the selloff on Tuesday is the repricing of expectations of the Fed. Until we really hear form the Fed we are not going to get a very clear direction.”
Stocks in Europe dropped for a third day, with retailers and energy companies leading the decline as banks gained.
Asian currencies remained at risk from a strong greenback. The offshore yuan weakened past 7 per dollar for the first time since July 2020. The yen declined to trade around 143.6 per dollar after it rallied away from just under the closely-watched 145 level Wednesday on signs the Bank of Japan was preparing an intervention.
Oil declined as traders grappled with concerns about global demand and assessed comments from the US on refilling strategic reserves. Natural gas increased as traders assessed Europe’s steps to contain the energy crisis, with governments making plans to shut down power in some places to avoid a total collapse of the system this winter. Gold fell.
Here are some key events to watch this week:
- China home sales, retail sales, industrial production, fixed assets, surveyed jobless rate, Friday
- Euro area CPI, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
- The S&P 500 fell 0.7% as of 10:55 a.m. New York time
- The Nasdaq 100 fell 1.4%
- The Dow Jones Industrial Average fell 0.1%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index fell 0.7%
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro rose 0.2% to $0.9998
- The British pound fell 0.4% to $1.1493
- The Japanese yen fell 0.3% to 143.44 per dollar
- The yield on 10-year Treasuries advanced four basis points to 3.45%
- Germany’s 10-year yield was little changed at 1.72%
- Britain’s 10-year yield was little changed at 3.13%
- West Texas Intermediate crude fell 4.4% to $84.62 a barrel
- Gold futures fell 1.1% to $1,690.40 an ounc