©Reuters. FILE PHOTO: Japanese Yen banknotes are seen in this illustrative image taken on September 23, 2022. REUTERS/Florence Lo/Illustration/File Photo
By Caroline Valetkevitch
NEW YORK (Reuters) – Global stocks fell on Thursday and US 10-year Treasury yields rebounded from four-month lows amid growing fears that aggressive central bank stance could push the global economy into a slowdown.
Wall Street stocks ended lower on recession concerns, while European stocks posted their biggest daily selloff of the year and a global stock index posted a third straight day of declines.
Investors fear the Federal Reserve “could overturn in a slowing environment,” said Ross Mayfield, investment strategy analyst at Baird.
“This week the mood has become a little less risky,” he said. “Recession fears have come to the fore.”
A US report showed that the number of Americans filing new jobless claims fell unexpectedly last week, pointing to another month of solid job growth and ongoing tightening of the labor market.
The Fed will likely have to raise interest rates to “just over” 5% and hold them there for some time, said Boston Fed Chair Susan Collins. Other Fed officials have also hinted at the need for a hawkish stance to fight inflation.
Earlier, European Central Bank President Christine Lagarde pushed euro-zone bond yields slightly higher by telling the World Economic Forum meeting in Davos that the bank would stay the course with rate hikes.
The fell 252.4 points, or 0.76%, to 33,044.56, the lost 30.01 points, or 0.76%, to 3,898.85, and the fell 104.74 points, or 0.96%, to 10,852.27.
The pan-European index lost 1.55% and the MSCI stock index worldwide lost 0.94%.
Investors digested more quarterly earnings reports. Procter & Gamble (NYSE:) has raised its full-year sales guidance and said it will continue to raise prices.
Netflix (NASDAQ:) shares are also up more than 6% in after-hours trading. Co-founder Reed Hastings announced he would be stepping down as chief executive, while the company also released quarterly results.
Benchmark 10-year Treasury yields strayed from 4-month lows as they neared a key technical level and the recent bond rallies looked overdone in the near term.
10-year yields last came in at 3.397%, having previously fallen to 3.321%, its lowest level since September 13. The 200-day moving average was 3.292%. Yields have fallen from 3.905% at the end of the year and from a 15-year high of 4.338% on October 21st.
In currency markets, the dollar fell 0.4% against the yen to 128.455 yen in afternoon trade, a day after the Bank of Japan decided not to halt its ultra-loose monetary policy.
In other data, overall US housing starts fell 1.4% last month to a rate of 1.382 million units. Building permits fell 1.6% to 1.330 million units.
The US government has reached its $31.4 trillion credit limit, with the Republican-controlled House of Representatives locked in a standoff with President Joe Biden’s Democrats over raising the ceiling. If the problem is not solved, it could lead to a financial crisis in a few months.
Treasury Secretary Janet Yellen told Congressional leaders that her department has begun implementing exceptional cash management measures that could prevent a default by June 5.
CHART: World stocks start 2023 strong (
In the energy market, oil prices rose 1%, extending a recent rally amid rising Chinese demand.
Futures were up $1.18, or 1.4%, to $86.16 a barrel, while US West Texas Intermediate (WTI) crude oil futures were up 85 cents, or 1.1%, to $80.33 a barrel. Those were the highest closes for both contracts since December 1st.