U.S. stocks turned lower in afternoon trading Thursday amid the most aggressive bond market sell-offs in more than a year even as Federal Reserve Chairman Jerome Powell struck a neutral tone on rate hikes during a key policy speech in New York.
Powell remarks, which included a nod to softer inflation data set against the resilient domestic economy, suggest a further indication of the Fed's 'wait and see' stance on near-term rate hikes, following a series of data releases showing stronger-than-expected retail sales, a resilient job market and above-trend economic growth.
That may provide some relief for investors who've been tracking the recent surge in Treasury yields, which hit a series of fresh multi-decade highs this week, would push the Fed further into its higher-for-longer' policy stance that's creating turmoil in global markets as as investors recalibrate markets for higher interest rates while adopting a defensive tone alongside the simmering conflict between Israel and Hamas.
Benchmark 10-year notes yields, which flirted with the 5% level in overnight trading following the biggest one-week move in yields in more than eighteen months, held at 4.986% in the wake of Powell's speech.
Lower down the curve, benchmark 2-year note yields eased to 5.195% after hitting a fresh 2006 high of 5.256% overnight while bets on a January rate hike from the Federal Reserve retreated to around 45%.
Those bets, however, were fortified by another stronger-than-expected reading for weekly jobless claims, which fell to a January low of 198,000 over the period ending on October 14.
Comments from New York Fed President John Williams yesterday, when he told an event at Queens College that the central bank needs to "keep this restrictive stance of policy in place for some time" in order to tame renewed inflation risks added to the upward moves and put more emphasis on today's speech from Chairman Jerome Powell later in the session.
In the middle east, Israel upped the pace of airstrikes on targets in Gaza, following the surprise attack from Hamas on October 7, but indicated it could allow limited aid from Egypt once the estimated 200 Israeli hostages held in Gaza are released.
Investors will also pick through details of two major earnings releases, which arrived after the close of trading yesterday, in the form of weaker-than-expected profit margins from Tesla (TSLA) -) and blowout subscriber numbers from Netflix (NFLX) -).
The tech sector also got a boost from a solid third quarter update out of Taiwan Semiconductor, the word's biggest contract chipmaker, which posted a 25% fall in overall profits but said its starting to see stabilization in the smartphone market and noted AI demand will be a long-term earnings driver.
In other markets was only modestly higher on the session with reports suggesting little support for Iran's move to embargo crude sales to Israel, and the U.S. easing sanctions on Venezuela, putting downward pressure on prices.
Brent crude contracts for December delivery were marked 10 cents higher at and changing hands at $91.60 per barrel while WTI futures contracts for November added 30 cents to $88.62 per barrel.
On Wall Street, the S&P 500, which is now up only 0.62% for the month, was marked 11 points lower in mid-day trading while the Dow Jones Industrial Average fell 51 points.
The Nasdaq was down 50 points, or 0.38%, with support coming from the 15.8% surge in Netflix and modest gains for chip stocks.
In overseas markets, the Europe-wide Stoxx 600 closed 1.16% lower Frankfurt, with the MSCI World index down 0.25%, as markets adjusted to the higher rate signals from the U.S. Treasury bond market.
The pan-Asia, the MSCI ex-Japan index slumped 1.56% into the close of trading, while the Nikkei 225 in Tokyo ended the day 1.9% lower as last night's sell-off on Wall Street engulfed regional stocks.
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