By Sinéad Carew
NEW YORK (Reuters) – A global index of stocks bounced back after a nine-day losing streak on Thursday as oil prices fell and U.S. Treasury yields pulled back from their highest levels in 16 years.
Adding to respite for weary equity investors was a decline in the dollar from a 10-month high reached on Wednesday. Earlier on Thursday, 10-year U.S. Treasury yields touched their highest levels since 2007.
U.S. crude futures settled lower after briefly nudging up above $95 a barrel for the first time since August 2022. Oil prices had added more than 3% on Wednesday after data showed a big drop in U.S. crude stocks, raising concerns about a supply-side energy shock. [O/R]
MSCI’s gauge of stocks across the globe gained 0.45% after trading in negative territory earlier in the day. But after nine days of losses the index remained on track for its biggest monthly percentage decline in a year.
“Investors have been focused on crude as a key inflation indicator. With crude falling, investors might feel it’s time to crawl out of the bunker and make some commitments to stocks,” said Bruce Zaro, managing director at Granite Wealth Management.
Zaro noted that the end of September is often particularly volatile as money managers rush to rebalance their portfolios ahead of the quarter-end.
Along with a focus on oil and the Federal Reserve’s interest rate policy, traders were also watching U.S. lawmakers’ efforts to avoid a government shutdown before a Sept. 30 funding deadline, Paul Christopher, head of global investment strategy, Wells Fargo Investment Institute, said earlier.
“There’s still liquidity out there, so people who missed out on the rally the first time are saying maybe I can buy in now,” Christopher said. “But there’s also people who want to sell because they’re concerned about the economy, the Fed and maybe a 5% 10-Treasury yield. The overall mood is nervous.”
The Dow Jones Industrial Average rose 116.07 points, or 0.35%, to 33,666.34, the S&P 500 gained 25.19 points, or 0.59%, to 4,299.7 and the Nasdaq Composite added 108.43 points, or 0.83%, to 13,201.28. The pan-European STOXX 600 index earlier closed up 0.36%.
Investors may also have extra jitters ahead of a key inflation reading due out before the market open on Friday and watching out for comments from Fed officials.
Chicago Fed President Austan Goolsbee said on Thursday that it would be “perfectly appropriate” to discuss changes to the central bank’s 2% inflation target once the current bout of inflation is over. But he said that changing the target in the middle of trying to return to it would be risky.
Fed Chair Jerome Powell did not comment on the outlook for monetary policy or the economy in remarks at the start of a teachers’ town hall.
In foreign exchange markets, the dollar index eased from a 10-month high but remained on track for a weekly gain, while investors stayed on guard for potential intervention in the Japanese yen as it holds near 11-month lows against the U.S. currency.
The yen strengthened 0.22% versus the greenback at 149.27 per dollar, still trading within a whisker of 150-per-dollar level seen as likely to provoke an official response or intervention. [.T][FRX/]
The dollar index, which measures the greenback against a basket of major currencies, fell 0.469%, with the euro up 0.58% to $1.0561 and Sterling was last trading at $1.2197, up 0.52%.
In U.S. Treasuries, benchmark 10-year notes were down 4.9 basis points to 4.577%, from 4.626% late on Wednesday. The 30-year bond was last down 2.9 basis points to yield 4.7044%, from 4.733%. The 2-year note was last was down 7.9 basis points to yield 5.0623%, from 5.141%.
In energy, oil prices fell as traders took profits after the recent rally and some worried that high interest rates may weigh on Western economies and oil demand.
U.S. crude settled down 2.1% to $91.71 per barrel and Brent ended at $95.38, down 1.2% on the day.
Gold, was heading for its biggest weekly decline since February as the rise in Treasury yields drives investors out of the precious metal, which pays no yield.
Spot gold dropped 0.4% to $1,866.58 an ounce. U.S. gold futures fell 0.37% to $1,865.40 an ounce.
(Additional reporting by Sinéad Carew in New York, Marc Jones in London, Tom Westbrook in Singapore; Editing by Leslie Adler and Daniel Wallis; Editing by Ros Russell, Mark Potter and Rami Ayyub)