By Stephen Culp
NEW YORK (Reuters) – U.S. stocks were lower on Wednesday and benchmark Treasury yields softened as a batch of data fueled looming worries that restrictive central bank policies could push the global economy into recession.
The Nasdaq joined the S&P 500 in the red, while defensive stocks helped buoy the Dow into positive territory, while 10-year Treasury yields extended their decline, touching levels last seen in September.
A spate of economic indicators on Wednesday suggested economic cracks are beginning to show. Private sector job adds fell well short of expectations, demand for home loans is softening despite falling mortgage rates, and expansion in the services sector is losing momentum.
Together, the data appears to suggest the Federal Reserve’s monetary tightening – designed to rein in inflation by tossing cold water on the U.S. economy – is having its intended effect.
“We’re slowing down – it’s become evident,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “And you factor in the potential for more weakness because of issues with the banks – lending standards will be raised and credit will be tightening – it seems to be coming to a head this week.”
At last glance, financial markets are pricing in a 62% likelihood that the central bank will let its key interest rate stand at the still-restrictive 4.75%-5.00% range at the conclusion of its next policy meeting in May, according to CME’s FedWatch tool.
The Dow Jones Industrial Average rose 54.18 points, or 0.16%, to 33,456.56, the S&P 500 lost 14.09 points, or 0.34%, to 4,086.51 and the Nasdaq Composite dropped 127.62 points, or 1.05%, to 11,998.70.
European shares lost ground as investors remained cautious, tilting toward defensive stocks amid economic uncertainty.
The pan-European STOXX 600 index lost 0.22% and MSCI’s gauge of stocks across the globe shed 0.44%.
Emerging market stocks lost 0.03%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.04% higher, while Japan’s Nikkei lost 1.68%.
Treasury yields slipped further, with the benchmark 10-year yield touching lows last seen in September as the weak data supported the notion of a “Fed pause.”
Benchmark 10-year notes last rose 11/32 in price to yield 3.2978%, from 3.337% late on Tuesday.
The 30-year bond last rose 4/32 in price to yield 3.5871%, from 3.594% late on Tuesday.
The greenback regained ground against a basket of world currencies after the kiwi rallied in the wake of the Bank of New Zealand’s unexpected 50 basis point rate hike.
The dollar index rose 0.07%, with the euro down 0.25% to $1.0925.
The Japanese yen strengthened 0.51% versus the greenback at 131.04 per dollar, while Sterling was last trading at $1.246, down 0.31% on the day.
Crude prices inched lower as signs of economic softness helped mitigate plans by OPEC+ producers to cut oil output.
U.S. crude fell 0.63% to $80.20 per barrel and Brent was last at $84.53, down 0.48% on the day.
Gold prices briefly touched their highest level since March 2022 before reversing course after a spate of soft U.S. economic data.
Spot gold dropped 0.1% to $2,018.17 an ounce.
(Reporting by Stephen Culp; Additional reporting by Dhara Ranasinghe; Editing by Andrea Ricci)
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