US stocks fall as Fed quagmire grips investors | Financial market news

The S&P 500 fell 3.5%, the Nasdaq 100 lost 5.1% while the Dow Jones Industrial Average fell 3.1%.

By Bloomberg

The surge in stocks following the Federal Reserve’s decision proved to be short-lived ahead of Friday’s jobs report, with traders fearing officials may be battling inflation amid the threat of a recession. .

Just a day after posting the biggest rally in two years, the S&P 500 has fallen, with more than 95% of its companies down. The Nasdaq 100 suffered one of its sharpest U-turns ever. The tech benchmark plunged about 5%, erasing its post-Fed gains. A sell-off in long-term Treasuries pushed the 10-year yield above 3%. The dollar soared.

Doubts about policymakers’ ability to halt the price run-up rocked markets, with the prospect of stagflation unnerving investors. By fending off a whopping 75 basis points in June, Fed Chairman Jerome Powell pushed back against the most aggressive forecasts of traders. However, the road remains bumpy, with crucial economic data and global developments that could cast doubt on the central bank’s approach. Friday’s employment reading is expected to show solid payroll growth and wages holding at unusually high levels – remaining a lasting source of inflationary pressures.

Rising longer-term yields are certainly important to the broader economic picture, as they affect borrowing costs. U.S. mortgage rates resumed their upward jump, hitting their highest level since August 2009. Separate data on Thursday showed productivity fell in the first quarter in the biggest way since 1947 as the economy was contracting, while labor costs were rising, illustrating an extremely tight labor market. .

Company Highlights:

  • Shares of e-commerce companies from Etsy Inc. to Shopify Inc. fell after weaker-than-expected quarterly results and forecasts heightened concerns about a slowing pace of online shopping.
  • EBay Inc. gave a lackluster sales and earnings outlook for the current quarter, accelerating its decline from highs reached when shoppers were stuck at home during the pandemic.
  • Elon Musk secured around $7.1 billion in new funding commitments, including from billionaire Larry Ellison, as well as a Saudi prince and Sequoia Capital, to help fund his proposed takeover of Twitter Inc. for $44 billion.

Elsewhere, the pound tumbled as investors looked past the Bank of England’s rate hike and focused on predictions of a recession in 2023. BOE Governor Andrew Bailey said the UK economy was already slowing due to a squeeze in consumer purchasing power, and that will help bring inflation down next year.

Key events this week:

U.S. April Jobs Report, Friday

Some of the major movements in the markets:

Shares

  • The S&P 500 fell 3.5% at 4 p.m. PT
  • The Nasdaq 100 fell 5.1%
  • The Dow Jones Industrial Average fell 3.1%
  • The MSCI World index fell 2.5%

Currencies

  • The Bloomberg Dollar Spot Index rose 0.9%
  • The euro fell 0.7% to $1.0550
  • The British pound fell 2.1% to $1.2365
  • The Japanese yen fell 0.7% to 130.03 per dollar

Obligations

  • The yield on 10-year Treasury bills rose 11 basis points to 3.04%
  • Germany’s 10-year yield rose seven basis points to 1.04%
  • The UK 10-year yield was little changed at 1.96%

Merchandise

  • West Texas Intermediate crude rose 0.4% to $108.20 a barrel
  • Gold futures rose 0.5% to $1,878.60 an ounce

–With help from Andreea Papuc, Cecile Gutscher, Denitsa Tsekova, John Viljoen, Vildana Hajric, Isabelle Lee and Peyton Forte.