Stocks Drop And Bond Rise With Economy And Rates In Focus

On Friday, all major US stock indexes ended lower, while there was a rise in US Treasury prices as concerns about a global economic recession intensified.

Meanwhile, the markets were also gearing up for a large interest rate hike from the US Federal Reserve in the coming week.

Economic concerns

Late on Thursday, FedEx Corp revealed that the slowdown in global demand had accelerated in the month of August and it was expected to get worse in the November quarter.

This amped up concerns about the economy, as the delivery company was forced to withdraw the financial forecasts it had made earlier.

This warning came when the markets are already very jittery because of the Fed meeting in which the US central bank is expected to deliver an interest rate hike of another 75 basis points.

However, data shows that some are also betting on a rate hike of 100 basis points. The Bank of England and the Bank of Japan are also scheduled for their own policy meetings in the next week.

Market analysts said that what was happening in the markets was what has been happening throughout the week.

They added that the volatility is because of the Fed’s decision and also because of FedEx’s dismal report, which is being regarded as a bellwether, not only for consumer spending but also for the economy.

Stocks and bonds

Analysts also said that the markets were down because of rising concerns that the US Fed is going to end up overtightening and this would drive the economy into a recession.

However, Treasury yields dropped after the warning from FedEx because it boosted the idea that the Federal Reserve can control inflation in times of slowing growth.

2-year Treasury yields had climbed to their highest level earlier in the day since 2007, which is 3.924%. But, they also declined for the day.

There was also a widening in the yield curve inversion of 2-year and 10-year Treasury yields, which is regarded as a harbinger of recession, but it eventually came down to the closing level seen on Thursday.

There was a 0.4 basis points decline in the 2-year Treasury yield to 3.869%, while a 0.6 basis points reduction was recorded in 10-year yields that brought it to 3.453%.

Equities decline

There was a 0.45% decline in the Dow Jones Industrial Average, as it reduced by 139.4 points to reach 30,822.42.

The S&P 500 index lost 0.72%, as it fell by 28.02 points to reach 3,873.33. The Nasdaq Composite dropped by 0.9%, or 103.95 points, as it closed at 11,448.40.

There was also a 1.58% loss in the continent-wide STOXX 600 index and a 0.96% decline was also seen in the MSCI’s index of global shares.

The dollar index also shed 0.1% for the day, while the euro recorded gains of 0.09% to reach $1.0008. There was also a 0.40% gain in the Japanese yen against the US dollar to 142.94.

As for the British pound, it was down by 0.38% to reach $1.142.