Stocks finished higher Thursday, while Treasury bond yields jumped amid bets on aggressive Fed rate hikes, investors kicked-off the market's toughest month in a positive mood.
Weakening growth in Asia, where PMI data Thursday indicates slowing in the region's three major economies, alongside Europe's Russia-linked energy crisis and record high inflation, has investors leaking confidence heading into the start of September, which is traditionally the month that offers the least in terms of historic returns for U.S. investors.
A further concern was added to the September list through a move by the U.S. government to ban the sale of crucial semiconductor components to China in the latest escalation of tensions between Washington and Beijing.
Nvidia (NVDA) said in Securities and Exchange Commission filing late Wednesday that the government has imposed new restrictions on the sale of its A100 and forthcoming H100 chips, which are also incorporated in other Nvidia-designed products.
Stocks faced headwinds linked to the Fed's inflation fight, with bets on a third consecutive 75 basis point rate hike rising to 72% in overnight trading.
Those bets were cemented by overnight comments from Cleveland Fed President Loretta Mester, who told an event in Dayton, Ohio that the Fed Funds rate is likely to rise "somewhat" above the 4% level, adding it was "wishful thinking" to assume that inflation has peaked.
Benchmark 2-year Treasury note yields traded north of 3.52% for the first time since 2007, while 10-year notes jumped 4 basis points to 3.271%.
The U.S. dollar index, meanwhile, was marked 0.91% higher at a fresh 20-year high of 109.722 against a basket of six global currency peers.
Jobs data Thursday provided more evidence for the inflation bulls, with weekly unemployment claims falling to 232,000, with third quarter unit labor costs rising by 10.2%, even as productivity contracts by -7.4%
That said, the Atlanta Fed's GDPNow forecasting tool suggests third quarter growth is rebounding firmly, at a 2.6% clip, while data for the month of August show steady, although by no means spectacular, end-of-summer activity.
Growth concerns beyond the U.S. remain, however, and oil prices extended declines in overnight trading amid reports of further Covid lockdowns in China that will accelerate the slump in demand from the world's biggest energy importer.
WTI futures contracts for October delivery were marked $3.26 lower in New York to trade at $86.29 per barrel while Brent contacts for the same month, the global pricing benchmark, fell $3.65 to trade at $91.96 per barrel.
Overnight in Asia, hopes of a fresh round of stimulus from Beijing helped China stocks to a modest Thursday gain, although weakness around the region pulled the MSCI ex-Japan index 1.85% lower on the session.
In Europe, stocks closed 1.9% lower in Frankfurt as expectations for a 75 basis point rate hike from the European Central Bank, which meets on September 8 in Frankfurt, are now fully-priced into regional interest rate markets.
On Wall Street, the S&P 500, which fell 4.24% last month, ended up 0.30%, while the Dow Jones Industrial Average rose 145.99 points, or 0.46%, to 31,656. The tech-focused Nasdaq lost 1.15%.
In terms of individual stocks, Nvidia shares were marked 7.8% lower after the U.S. government ordered the chipmaker to stop exporting artificial intelligence components to clients in China.
Tesla (TSLA) shares fell 7.7% following data from China indicating a solid improvement in August sales and exports as production at its key Shanghai factory accelerated from its summer lull.
Walt Disney (DIS) shares ended slightly higher following a report from the Wall Street Journal that the media and entertainment group is planning an 'Amazon-like" membership program.
Apple (AAPL) shares rose 0.47% after report from analysts at International Data Corporation forecast weaker-than-expected global smartphone shipments between now and the end of the year.
