A selloff in stocks and bonds eased as calm returned to markets after a rate scare that pushed US shares to their lowest since early June.
(Bloomberg) — A selloff in stocks and bonds eased as calm returned to markets after a rate scare that pushed US shares to their lowest since early June.
US equity futures gained 0.3% while the Dow Jones Industrial Average fell below its 200-day moving average — a technical signal that suggests the index has become oversold and can bounce back. Wall Street’s fear gauge — the Cboe Volatility Index or VIX — retreated after hitting its highest level since May.
US Treasury yields slipped three basis points, backtracking from a 16-year high sparked by speculation the Federal Reserve will keep policy restrictive into next year, or longer. A gauge of the dollar traded near its highest this year.
“Markets were in need for a reason to sell off further but didn’t end up getting one,” said Hauke Siemssen, rates strategist at Commerzbank AG. “Part of the stabilization could be psychological,” where investors have reached a threshold for bond yields and need a more concrete reason to cross it, he said.
US stocks are heading for their biggest monthly decline since December as investors worry the Fed would keep interest rates higher for longer at a time when economic growth is slowing.
The Federal Reserve Bank of New York’s measure of how much bond investors are compensated for holding long-term debt turned positive for the first time since June 2021, suggesting traders are betting on elevated policy rates.
Treasury ‘Term Premium’ Gauge Positive for First Time Since 2021
Oil resumed its climb to $92 a barrel. US consumer confidence has taken a knock from higher costs at the pump and the spreading impact of aggressive rate hikes.
A gauge of consumer sentiment dropped to 103 from a revised 108.7 in August, missing the median estimate of 105.5 in a Bloomberg survey of economists.
“We are at an inflexion point in the economy and the bond market,” Bob Michele, CIO for fixed income at J.P. Morgan Asset Management, said in an interview with Bloomberg TV. “The last 15 years were not normal, we got to a structural low and now we are going to revert to something that is more normal.”
Key events this week:
- US durable goods, Wednesday
- Eurozone economic confidence, consumer confidence, Thursday
- US initial jobless claims, GDP, Thursday
- Fed Chair Jerome Powell town hall meeting with educators while Richmond Fed President Tom Barkin, Chicago Fed President Austan Goolsbee make speeches, Thursday
- Eurozone CPI, Friday
- Japan unemployment, industrial production, retail sales, Tokyo CPI, Friday
- US consumer spending, wholesale inventories, University of Michigan consumer sentiment, Friday
- ECB President Christine Lagarde speaks, Friday
- New York Fed President John Williams speaks, Friday
Some of the main moves in markets:
- S&P 500 futures rose 0.3% as of 8:28 a.m. New York time
- Nasdaq 100 futures rose 0.2%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 was little changed
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.3% to $1.0544
- The British pound fell 0.1% to $1.2145
- The Japanese yen was little changed at 149.15 per dollar
- Bitcoin rose 2.2% to $26,734.94
- Ether rose 2.4% to $1,625.39
- The yield on 10-year Treasuries declined three basis points to 4.51%
- Germany’s 10-year yield declined two basis points to 2.79%
- Britain’s 10-year yield declined two basis points to 4.31%
- West Texas Intermediate crude rose 1.9% to $92.13 a barrel
- Gold futures fell 0.5% to $1,909.30 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Sagarika Jaisinghani and Sujata Rao.
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