By Sinéad Carew
NEW YORK (Reuters) – Global stocks were down on Wednesday extending a sharp sell-off in the previous session, while U.S. Treasury yields dipped after hitting their highest level since 2007.
Meanwhile, the dollar hit a 10-month high, pushing the euro to an almost nine-month low and keeping the yen in intervention territory, as investors bet that the U.S. economy will cope better with higher interest rates than competitors.
Stocks and bonds have dropped in recent weeks as investors prepared for the prospect that central bankers will hold interest rates “higher for longer” than previously expected, to try to squeeze inflation out of economies.
On top of rate concerns investors have also been eyeing Detroit’s auto worker strikes and as well as the uncertainty of a potential U.S. government shutdown in coming days.
“After the extreme selling that occurred in recent days, with (Tuesday) being the culmination, people are thinking we may have reached a point of capitulation, which has them stepping up and looking for bargains,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
But Pavlik does not believe the market has reached a bottom yet.
“We’re on a cusp but we’re not there yet. We still have a lot of headwinds: the automotive strike, the possibility of a government shutdown again, higher interest rates … and oil trading above $90 a barrel,” Pavlik said.
The Dow Jones Industrial Average fell 62.61 points, or 0.19%, to 33,556.27, the S&P 500 gained 0.14 points, or 0.00%, to 4,273.67 and the Nasdaq Composite added 13.62 points, or 0.1%, to 13,077.23.
The pan-European STOXX 600 index lost 0.21% and MSCI’s gauge of stocks across the globe shed 0.11% after falling 1.2% in Tuesday’s session. The index, which is eyeing its ninth consecutive daily decline, has fallen 4.7% since the start of September.
In U.S. Treasuries, benchmark 10-year notes were down 0.2 basis points to 4.556%, from 4.558% late on Tuesday. The 30-year bond was last down 0.6 basis points to yield 4.6897%, from 4.696%. The 2-year note was last was up 1 basis points to yield 5.0874%, from 5.077%.
In currencies, investors are on the lookout for government intervention in the Japanese yen as it has been approaching 150 per dollar, which is seen as the level at which Japan could intervene.
The yen fell 0.22% versus the greenback at 149.41 per dollar on Wednesday after hitting its weakest level against the greenback in roughly a year.
The dollar index, which measures the greenback against a basket of major currencies, rose 0.33%, with the euro down 0.5% to $1.0517, while Sterling was last trading at $1.2134, down 0.19% on the day.
“The U.S. is most able to cope with these new challenges – higher interest rates and higher energy prices,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, citing the depth of U.S. capital markets and households that are more immune to rising interest rates.
“Yes, these are major headwinds, but the U.S. still looks like the driest towel on the rack. The news from Europe isn’t really that good,” Chandler added.
Oil prices surged on Wednesday, as markets focused on low global supply in the run-up to winter, throttled by OPEC+ production cuts.
U.S. crude recently rose 3.05% to $93.15 per barrel and Brent was at $96.16, up 2.34% on the day.
(Reporting by Sinéad Carew and Karen Brettell in New York, Harry Robertson in London and Julie Zhu in Hong Kong; Editing by Edwina Gibbs, Anil D’Silva, Elaine Hardcastle and Will Dunham)
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