Stocks clawed back some of the week’s losses driven by fears of higher global interest rates.
(Bloomberg) — Stocks clawed back some of the week’s losses driven by fears of higher global interest rates.
The S&P 500 erased an 0.8% loss that had put the gauge on track for its biggest weekly drop since March. The cyclically-oriented Dow Jones Industrial Average edged higher with health insurer UnitedHealth Group adding to the momentum. The tech-heavy Nasdaq 100 remained lower on the day. Bitcoin slid as much as 8% and oil was set for its first weekly loss since June.
While fears of an imminent recession are fading wary investors are instead facing entrenched inflation and the prospect of more policy tightening.
“Investors are concerned that if bond yields continue going higher, the economy is too strong and the Fed will need to raise interest rates further,” said David Donabedian, chief investment officer of CIBC Private Wealth US. “And with the bond yield high enough, that poses competition for equity investors who feel the bond market is less risky than the stock market right now.”
Global bonds staged a Friday rebound on speculation losses may be overdone. In Treasuries, yield on the 10-year pulled back from Thursday’s levels that were approaching the highest since 2007. UK and German bonds advanced.
Markets are on edge ahead of the annual gathering of policy makers at Jackson Hole in Wyoming next week, according to Andrew Hunter, deputy chief US economist at Capital Economics.
“Expectations of an economic re-acceleration have mounted,” Hunter wrote. “But with little evidence that stronger growth will threaten to reignite inflationary pressures, we don’t think there is any need for Powell to dust off his hawkish script from last year’s event.”
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In another sign of nervousness, the Cboe Volatility Index climbed above 18, touching the highest level since May. Bank of America Corp.’s Michael Hartnett warned that stocks may drop another 4%, given China’s economic turmoil and jump in bond yields.
Options expiration is also catching the attention of traders. There’s some $2.2 trillion of longer-dated contracts tied to stocks and indexes scheduled to mature on Friday, according to an estimate by Rocky Fishman, founder of derivatives analytical firm Asym 500.
“Markets are being hit by a perfect storm amid surging rates, worsening data in China and poor summer liquidity,” Emmanuel Cau, a strategist at Barclays Plc, wrote in a note.
In other markets, Bitcoin traded around $26,000. Elon Musk’s SpaceX sold the cryptocurrency after writing down $373 million, The Wall Street Journal reported.
Some of the main moves in markets:
- The S&P 500 was little changed as of 12:01 p.m. New York time
- The Nasdaq 100 fell 0.2%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 0.6%
- The MSCI World index fell 0.2%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0874
- The British pound was little changed at $1.2735
- The Japanese yen rose 0.5% to 145.14 per dollar
- Bitcoin fell 6% to $25,983.22
- Ether fell 3.4% to $1,659.01
- The yield on 10-year Treasuries declined five basis points to 4.23%
- Germany’s 10-year yield declined nine basis points to 2.62%
- Britain’s 10-year yield declined seven basis points to 4.68%
- West Texas Intermediate crude rose 0.2% to $80.57 a barrel
- Gold futures rose 0.3% to $1,920.20 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alice Atkins, Alex Nicholson and Cecile Gutscher.
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