Stocks ended mixed Wednesday, while the dollar found favor against its global peers and bond yields inched lower, as global markets retreated from bets on a near-term recovery to focus on prospects of a looming recession.
Much of that concern is linked to the impact central bank rate hikes, designed to fight the fastest inflation in a generation, will have on both consumer demand and broader economic growth.
Cleveland Federal Reserve Bank President Loretta Mester, in fact, told CNBC Wednesday that she would back a 75 basis point rate increase next month if economic conditions were to remain unchanged.
A reading of U.S. consumer confidence, yesterday was the lowest in nearly two years, while data from manufacturing to housing to retail sales suggests a broad-based slowdown in the world's biggest economy.
Investors are still holding out hope, however, that central bankers will ease up on their inflation fight if the economy slips into recession, and may get at least an indication of that from speeches later today at the European Central Bank's annual forum in the resort town of Sintra in Portugal.
That bet found some life after a softer-than-expected reading for June inflation in Germany which suggests consumer price pressures may have peaked in Europe's biggest economy.
Federal Reserve Chairman Jerome Powell, ECB President Christine Lagarde and Bank of England Governor Andrew Bailey are all slated to speak at the event, which begins at around 8:30 am Eastern time.
Ahead of that, and with global stocks nursing steep losses following last night's sell-off on Wall Street, the U.S dollar index -- which tends to rise against its global peers when investors are taking a defensive tone in the markets -- gained 0.3% to trade at 104.805, while benchmark 10-year Treasury note yields eased to 3.127% against 3.083% for 2-year notes.
"Treasuries seem to have found a safe-haven bid for the moment, something that is familiar from markets past, but not associated with this cycle, in which in most cases, a rise in treasury yields has served as a driver of negative risk sentiment," said Saxo Bank strategists. "The technical situation picks up energy if the 10-year yield follow through last week’s low of 3.00%, which could shift the focus back toward the 2.75% area and suggest that market concern for an incoming recession is gathering pace."
Oil prices bumped higher ahead of a two-day series of OPEC meetings, held virtually in Vienna, that are expected to conclude with the cartel making no changes to its modest pace of monthly output increases.
WTI futures for August delivery were marked $1.05 higher on the session at $112.62 per barrel ahead of Energy Department stockpile data later in the day, while Brent contracts for the same month rose 98 cents to $119.07 per barrel.
Europe's region-side Stoxx 600 index, on pace for its worst quarterly decline since the pandemic, closed 0.67% lower in late-day Frankfurt trading, following on from a 1.6% slump for the MSCI ex-Japan index in Asia.
On Wall Street, the S&P 500, which remains firmly entrenched in bear-market territory, finished down 0.07%, while the Dow Jones Industrial Average rose 82 points, or 0.27%, to 31,029. The tech-focused Nasdaq slipped 0.03%.
In terms of individual stocks, Tesla (TSLA) shares fell 1.8% following a report that the clean-energy carmaker has laid off around 200 workers in a California office focused on its auto pilot system.
Bed Bath & Beyond (BBBY) shares tumbled 23.6% after the struggling home retailer posted weaker-than-expected first quarter earnings and unveiled the resignation of CEO Mark Tritton.
Walt Disney (DIS) fell 0.3% following a move by the entertainment giant's board of directors to extend the contract of CEO Bob Chapek by another three years.
Pinterest (PINS) shares finished up 1.32% following news that longtime CEO Ben Silbermann will leave the group to make way for former Google (GOOGL) executive Bill Ready.
General Mills (GIS) gained 6.4% after posting stronger-than-expected fourth quarter earnings and boosting its quarterly dividend, despite "significant inflation and supply chain disruptions" that pressured profit margins.
TheStreet reporter Rob Lenihan contributed to this report.
