NEW YORK, Oct 17 — US stocks dipped and benchmark Treasury yields surged on Tuesday as robust economic data and strong third-quarter earnings appeared to make the case for the Federal Reserve keeping restrictive policies in place for longer than expected.
All three major US stock indexes headed lower with interest rate sensitive megacap shares pulling the tech-laded Nasdaq down the most.
Semiconductor shares tumbled after the Biden administration announced plans to halt shipments to China of more advanced artificial intelligence chips.
The Philadelphia SE Semiconductor index .SOX was last down 1.5 per cent.
Consensus-topping retail sales data, along with solid profit beats from Bank of AmericaBAC.N and Goldman SachsGS.N added to a growing mountain of evidence that the United States economy is chugging along despite the central bank’s attempts to rein in inflation by raising interest rates.
“Good news is bad news, that’s the key,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “The retail sales number was solid, and could have the possible effect of keeping rates higher for longer.”
“That’s probably the biggest factor in the turnaround in today’s equities markets.”
Market participants were also eyeing the unfolding humanitarian crisis arising from the Israel-Hamas conflict as US President Joe Biden heads to the region.
The Dow Jones Industrial Average .DJI fell 74.71 points, or 0.22 per cent, to 33,909.83, the S&P 500 .SPX lost 14.97 points, or 0.34 per cent, to 4,358.66 and the Nasdaq Composite .IXIC dropped 84.32 points, or 0.62 per cent, to 13,483.67.
European stocks extended their losses after the US opening bell, weighed down by a spate of downbeat earnings and mounting geopolitical concerns arising from the Middle East conflict.
The pan-European STOXX 600 index .STOXX lost 0.36 per cent and MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.09 per cent.
Emerging market stocks rose 0.50 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.55 per cent higher, while Japan’s Nikkei .N225 rose 1.20 per cent.
Benchmark Treasury yields spiked after the strong retail sales data as market participants adjusted their expectations regarding the duration of the central bank’s tightening cycle.
Benchmark 10-year notes US10YT=RR last fell 30/32 in price to yield 4.8341 per cent, from 4.71 per cent late on Monday.
The 30-year bond US30YT=RR last fell 44/32 in price to yield 4.9623 per cent, from 4.866 per cent late on Monday.
The greenback edged lower against a basket of world currencies amid the unfolding Middle East drama and as market participants braced themselves for speeches by central bank officials.
The dollar index .DXY fell 0.05 per cent, with the euro EUR= up 0.15 per cent to US$1.0574.
The Japanese yen weakened 0.12 per cent versus the US dollar at 149.69 per dollar, while sterling GBP= was last trading at US$1.2181, down 0.29 per cent on the day.
Crude prices inched higher as traders looked to Biden’s impending visit to shore up support for Israel while containing the conflict in the Middle East.
US crude CLcv1 rose 0.6 per cent to US$87.18 per barrel and Brent LCOcv1 was last at US$90.22, up 0.64 per cent on the day.
Gold prices rose as the safe-haven metal benefited from mounting geopolitical uncertainties.
Spot gold XAU= added 0.4 per cent to US$1,926.39 an ounce. — Reuters