U.S. stocks ended lower Wednesday as investor focus returned to the impact of speeding inflation on global economic growth, pulling Treasury bond yields and the dollar firmly lower.
Fresh inflation readings from South Africa to Great Britain and Canada indicated that central bank action, at least to date, has had little impact on consumer price pressures, while digging into the readings showed a broadening of their effects, particularly in the United Kingdom, where CPI hit a four-decade high of 9.1%.
The prospect of slower growth for the world's major economies was also linked to a weaker session for Asia stocks, which fell sharply amid concern over a new round of Covid restrictions. That sent the U.S. dollar firmly higher in overnight trading and established the 'risk-off' narrative that pulled futures lower.
As the dollar turned lower, however, and Treasury yields fell, the U.S. recession debate intensified, following data from the Atlanta Fed showing essentially no growth in the domestic economy this quarter, following a 1.5% contraction over the first three months of the year, alongside a slow by steady increase in weekly jobless claims, stalled consumer spending and a weakening housing market.
Federal Reserve Chairman Jerome Powell began two days of testimony on Capitol Hill Wednesday.
Powell faced members of the Senate Banking Committee today, with a follow-on sitting before the House Financial Services Committee Thursday, amid the fastest pace of domestic inflation in more than four decades - and just four months ahead of key mid-term election that could see Republicans regain control of both Houses of Congress.
"It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all," Powell said in his prepared remarks. "Inflation has obviously surprised to the upside over the past year, and further surprises could be in store."
Against that backdrop, Europe's region-wide Stoxx 600 closed 0.69% lower in Frankfurt, following on from a 2.3% slide for Asia's MSCI ex-Japan benchmark.
In the U.S., benchmark 10-year Treasury bond yields fell to 3.15% in New York trading, against a 3.071% peg for 2-year notes, while the dollar index rose 0.35% against a basket of six global currencies to 104.066 in early European trading.
On Wall Street, the Dow Jones Industrial Average ended off 47 points. The S&P 500, which is down 21% for the year, slid 0.13%. The tech-focused Nasdaq finished off 0.15%.
Oil prices fell were also firmly in the red. President Joe Biden asked Congress to suspend the federal gas tax for at least three months, while asking states for similar relief, in order to ease a key component of domestic inflation in the world's biggest economy.
The widely expected move -- alongside the impact of new Covid infections in China and the prospect of further business and factory restrictions -- took $4 from WTI crude futures for August delivery, which ended just over $105 per barrel.
Data from the AAA motor club, meanwhile, indicated that U.S. gas prices eased from last week's all-time high to a national average of around $4.955 per gallon last night, a move that still leaves pump prices some 61.8% higher than this time last year.
In terms of individual stocks, Boeing (BA) shares ended slightly higher after the planemaker cautioned that supply chain disruptions will likely continue until at least the end of next year.
Speaking at Bloomberg's Qatar Economic Forum in Doha, CEO Dave Calhoun said aircraft demand is surging, thanks in part to firm rebound in post-pandemic travel, but labor and part shortages will make it difficult for suppliers to meet customer needs.
U.S. online trading firms specializing in crypto, such as Coinbase Global (COIN) and Robinhood (HOOD) were hit hard after BinanceUS, an arm of the word's biggest digital currency exchange, eliminated its bitcoin spot trading fees.
BinanceUS will now allow its users to trade bitcoin, the biggest cryptocurrency, against assets such as the U.S. dollar, tether, and other dollar-backed stablecoins for free, eliminating its prior levy of 0.1% on transaction valued at less than $50.
