The Nasdaq 100 experienced its worst three-day decline since February, dropping 3.2%. After the minutes from the most recent meeting revealed authorities were considering tighter policy, investors began to lose faith that the Federal Reserve was done rising interest rates. Within a few basis points of its highs in 2022, the 10-year Treasury yield increased as high as 4.33%.
According to Tom Garretson, a senior portfolio manager at RBC Wealth Management, the stock decline thus far has been less severe than comparable periods of high real rates.
In an interview, Garretson stated that “tech stocks — and certainly equities broadly — are feeling the weight of rising real yields, but thus far not to the extent that we have seen during previous episodes of rising yields.” “We have seen tech pull back by about 7% to 15% during past periods over the last three years of similar rises in real yields.”
The labour market is still strong, according to data released before the New York stock exchange opened, which did little to alter the perception that future Fed tightening is likely.
They have no cause to let their guard down, according on this week’s data, according to Mike Loewengart of Morgan Stanley Global Investment Office. “Another rate hike can’t be ruled out, even if the Fed stays on hold next month,” says the Wall Street Journal. “Housing starts, retail sales, and jobless claims are all reinforcing the picture of a robust economy.”
The Cboe Volatility Index, or VIX, a measure of anxiety on Wall Street, reached 18 for the first time in seven sessions. Since a spate of bank failures shook the market in March, the VIX hasn’t risen above 30 – an indicator of elevated volatility.
Investors will soon be looking to next week’s policymaker conference at Jackson Hole, Wyoming, to get a sense of how the Fed is feeling.
This week, the movements in the bond markets have been quick and abrupt. As the durability of the world’s largest economy defies forecasts that a string of Federal Reserve interest-rate hikes would trigger a recession, Treasuries have been a major driver of the global debt selloff.
Read more: Concerns about rate hikes drive global yields to 15-year highs in March
According to Jeffrey Roach, chief economist at LPL Financial, “our baseline is the Fed will not likely alter rates at the next meeting, but the following meeting decision is yet to be determined.” As investors reassess their prospects for long-term inflation, Treasury rates are reaching new highs.
In the UK, the rise in gilt yields is the result of investor wagers that the Bank of England would need to hike interest rates further to 6% and keep them there for longer due to persistently high inflation and solid wage growth. Following weak investor demand at a debt auction, the yield on Japan’s 20-year bonds increased.
Also continuing to dampen mood is China. The real estate market fall may be worse than official reports indicate, according to the picture being painted by real estate professionals and independent data suppliers.
On Thursday, China stepped up its attempts to stop currency losses by providing the strongest guidance it has given since October through its daily reference rate for the controlled currency. According to people familiar with the situation, authorities instructed state-owned banks to increase their currency market involvement this week in an effort to stop a spike in yuan volatility.
While the pound continued to outperform, the dollar paused after a five-day ascent. Crude ended a three-day decline.
Important events this week