U.S. stocks closed sharply lower Thursday as investors eyed movements in the bond market, picked through a mixed set of headlines from China and reacted to a key interest rate decision from the European Central Bank ahead of tomorrow's crucial inflation reading.
Stocks were broadly weaker throughout the session, but accelerated declines into the close as Treasury yields crept higher and, and the U.S. dollar surged against its global peers, ahead of tomorrow's crucial May inflation reading from the Commerce Department.
The day was set up for a weaker start, however, as a big rebound in China exports, which soared nearly 17% from last year in the month of May as factories roared back to life following the easing of Covid restrictions, was tempered by news that Shanghai is looking to resume lockdowns in the country's biggest city following the identification of new Covid infections.
The news trimmed gains for both regional and European stocks, where investors awaited a major policy decision from President Christine Lagarde.
No changes were made to the ECB's suite of record low interest rates, but traders were correct in betting that its long-running quantitative easing program will come to an end -- the termination date was set for July 1 -- and rates hikes were forecasted for the summer as the region looks to tame record high inflation while gently protecting its modest growth prospects.
"High inflation is a major challenge for all of us," the ECB said. "In May inflation again rose significantly, mainly because of surging energy and food prices, including due to the impact of the war. But inflation pressures have broadened and intensified, with prices for many goods and services increasing strongly."
The region-wide Stoxx 600 closed 1.3% lower in Frankfurt after the ECB decision, following on form a 0.5% decline for Asia's MSCI ex-Japan benchmark.
In the U.S, weekly jobless claims data at 8:30 am Eastern time showed a 225,000 tally, the highest since mid-January, as investors adopt a cautious stance on risk ahead of tomorrow's May inflation reading, which is expected to show a modest easing in core consumer price pressures.
Soaring oil and energy prices, however, will likely keep that headline rate unchanged at a near forty-year high of 8.3%.
U.S. gas prices, in fact, neared a record-high national average of nearly $5 a gallon Thursday as oil prices held nearly multi-week highs and the nation's emergency crude stockpile fell to its lowest levels in more than three decades.
U.S. gasoline prices reached an all-time high of $4.970 per gallon yesterday, according to data from the AAA, 1.5 cents higher than Tuesday's previous record and an eye-watering 62% higher than last year's May average of $3.067 per gallon.
In global crude markets, WTI futures contracts for July delivery, which are closely linked to U.S. gas prices, closed 86 cents lower on the session at $121.25 per barrel, following the Energy Department data yesterday that showed stockpiles at the Strategic Petroleum Reserve now sit at the lowest levels since March of 1987.
Benchmark 10-year Treasury note yields were last seen 4 basis points higher from Wednesday's close at 3.045% while the U.S. dollar index, which tracks the greenback against a basket of six global currencies, rose 0.62% to 103.177.
On Wall Street, the Dow Jones Industrial Average fell 639 points by the close of trading while the S&P 500 fell 98 points. The tech-focused Nasdaq was down 332 points.
Tesla (TSLA) shares were the most active name throughout the session, rising as much as 3.7% before turning red late in the session following data from China showing a solid rebound in May sales and exports from the world's biggest car market and a price target boost and upgrade from UBS.
CVS Health (CVS) shared nudged 0.6% higher by mid-day after the group reiterated its full-year profit outlook ahead of a series of investor meetings scheduled for the remainder of June, but closed 1.2% lower after it was caught in the later afternoon downdraft.
Target (TGT) shares fell 1.37% after the retailer boosted its quarterly dividend just days after warning that excess inventories and higher input prices would pressure near-term profit margins.
Twitter (TWTR) shares, meanwhile, fell 2.18% lower after the micro-blogging website reportedly agreed to share a "firehose' of data with Elon Musk in order to placate his concerns over the level of fake accounts and bots on the platform.
