Dollar Rallies As Risk-Off Tone Takes Stocks Lower: Markets Wrap

(Bloomberg) -- Stocks across global financial markets were pummeled after a wave of rate hikes from central banks, with the Federal Reserve and the European Central Bank warning of more pain to come. 

US equities hit session lows in the afternoon in New York, with the S&P 500 declining as much as 2.9% and the tech-heavy Nasdaq 100 falling as much as 3.8%. Both indexes ended Wednesday in the red after Fed Chair Jerome Powell reiterated his hawkish stance and policymakers signaled a peak rate that was above market expectations. Stocks in Europe closed Thursday’s session lower after the ECB’s upward revision to 2024 inflation projections.

The US dollar rallied the most in two months. Britain’s pound fell after the Bank of England slowed its pace of monetary tightening, which investors interpreted as a sign that rates could peak at a lower level than expected. The euro dropped.

A global rally sparked by softer-than-expected US consumer price index data came to an abrupt halt on Wednesday after the Fed sought to dispel hopes for a rate cut next year. While Fed and ECB slowed the tempo of their hikes to half a percentage point, Powell and ECB President Christine Lagarde hammered home their resolve to remain persistent as they battle inflation. 

Investors are also parsing a bevy of US data Thursday showing the economy cooling, even as a labor market stays strong. Softening in the labor market remains a big target for the Fed. 

“Markets have been in a tug-of-war between better-than-feared economic data juxtaposed with concerns about the potential for the Fed to over-tighten monetary policy and push the economy into a recession,” said Art Hogan, chief market strategist at B. Riley Wealth. 

Key events this week:

• Eurozone S&P Global PMI, CPI, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 2.8% as of 2:21 p.m. New York time
• The Nasdaq 100 fell 3.6%
• The Dow Jones Industrial Average fell 2.6%
• The MSCI World index fell 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 1%
• The euro fell 0.5% to $1.0626
• The British pound fell 2% to $1.2182
• The Japanese yen fell 1.7% to 137.74 per dollar

Cryptocurrencies

• Bitcoin fell 2.3% to $17,411.81
• Ether fell 3% to $1,271.9

Bonds

• The yield on 10-year Treasuries declined four basis points to 3.44%
• Germany’s 10-year yield advanced 14 basis points to 2.08%
• Britain’s 10-year yield declined seven basis points to 3.24%

Commodities

• West Texas Intermediate crude fell 0.9% to $76.59 a barrel
• Gold futures fell 1.6% to $1,788.90 an ounce

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