U.S. stocks extended declines Thursday, likely snuffing out Wall Street's longest wining streak in two years, following a series of hawkish remarks on rate hikes from Federal Reserve Jerome Powell.
In prepared remarks for a policy discussion at the Jacques Polak Annual Research Conference, Powell said rate decisions will be taken on a meeting-by-meeting basis, but stressed the Fed would be "attentive" to price given that their is a "long way to go" to return inflation to the central bank's preferred 2% target.
"If it becomes appropriate to tighten policy further, we will not hesitate to do so," Powell said, adding "the Fed is committed to achieving a stance of monetary policy that is sufficiently restrictive to bring inflation down to 2% over time; We are not confident that we have achieved such a stance."
Last week's pullback in yields, which pushed 10-year notes below the 4.5% mark for the first time since September, may have compelled Powell to take a more hawkish tone.
That yield decline, however, was also tested by a weaker-than-expected auction of $24 billion in new 30-year bonds, which attracted $54 billion in overall bids, down sharply from last month's sale, with foreign buyers taking around 60.1% of the total, the lowest in two years.
Investors demanded a yield of 4.769% to take the long-term paper, a level that was more than 5 basis points higher than prior to the auction, one of the largest 'tails' for a long-bond auction in years.
Stocks have risen for each of the past eight sessions, the longest run of gains since 2021, while a close in the green today would mark the best series of gains since 2004. Another move higher Friday would take the streak all the way back to 1995.
Much of the run has come amid a sharp decline in Fed rate hike forecasts, with the CME Group's FedWatch indicating no better than a 23.3% chance of another move higher in the Fed Fund rate, which currently sits at between 5.25% and 5.5%, over the next five meetings.
The odds of a rate cut, however, have risen to as high as 40.5%, pegged for the June meeting, with expectations of further reductions over the summer months.
"Markets have had a strong move but have edged closer to overbought levels, said Quincy Krosby, Chief Global Strategist for LPL Financial in Charlotte, North Carolina.
"Powell's comments coupled with a disappointing auction is a logical excuse for the market to begin consolidating gains," she added.
Benchmark 10-year note yields, which dipped below 4.5% for the first time since early September in the overnight session, were trading 7 basis points higher at 4.636% Thursday following yesterday's mixed auction of $40 billion in new notes, today's 30-year sale and Powell's comments.
Markets were also navigating the release of weekly jobless claims data from the Labor Department, which showed that around 217,000 Americans filed for new unemployment benefits last week, down from the previous tally of 220,000, as hiring continues to cool into the autumn months.
On Wall Street, the S&P 500 was marked 33 points, or 0.75% lower following the 30-year auction and Powell's remarks, while the Dow Jones Industrial Average fell 2133 points. The tech-focused Nasdaq was down 107 points.
In other markets, Brent crude prices, the global benchmark, fell below the $80 mark for the first time since July in overnight trading as investors continue to discount the impact of production cuts from Russia and Saudi Arabia and focus on fading winter demand from China and Europe.
Brent futures contracts for January delivery were last seen trading 44 cents higher on the session at $79.98 per barrel while WTI contracts for December added 40 cents to trade at $75.71 per barrel.
In overseas markets, Europe's Stoxx 600 was marked 0.84% higher by the close of trading in Frankfurt, powered in part by another solid earnings session and dovish comments on rates hikes from European Central Bank Vice President Luis de Guindos.
Overnight in Asia, the region-wide MSCI ex-Japan benchmark slipped 0.06% into the close of trading, while Japan's yen hit a fresh one-year low of 151.03 against the U.S. dollar, helping the export-focused Nikkei 225 close 1.49% higher on the session.
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