In This Article:
By Sinéad Carew
(Reuters) - Wall Street stocks finished lower while bond yields and the dollar rose on Thursday as investors worried about the potential for aggressive U.S. policy tightening as other central banks around the world moved to reduce support.
The benchmark 10-year U.S. Treasury yield jumped, following two days of declines, after a flurry of U.S. economic data such as retail sales and jobless claims and the European Central Bank's announcement of less aggressive than expected tightening plans.
New York Fed President John Williams said on Thursday that the U.S. Federal Reserve should reasonably consider raising interest rates by a half percentage point at its next meeting in May, which was seen as a further sign that even more cautious policymakers are on board with bigger rate hikes.
This was after the ECB said it plans to cut bond purchases - known as quantitative easing - this quarter, then end them at some point in the third quarter.
Investors also eyed hefty rate hikes by New Zealand's central bank and the Bank of Canada, and a surprise rate hike by the Bank of Korea as well as policy tightening by the Monetary Authority of Singapore.
These moves all exacerbated bond yield increases and stock price declines, according to Mona Mahajan, senior investment strategist at Edward Jones who also noted that Thursday's data showed the Fed's need to act fast.
"All systems are go for the Fed to move pretty aggressively," said Mahajan. "Generally it's a global battle to fight inflationary pressures."
U.S. stocks had gained on Wednesday on hopes that price increases could be peaking. But Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut, saw Thursday's trading action as a sign that there was little conviction behind those hopes.
The Dow Jones Industrial Average fell 113.36 points, or 0.33%, to 34,451.23 while the S&P 500 lost 54 points, or 1.21%, to 4,392.59 and the Nasdaq Composite dropped 292.51 points, or 2.14%, to 13,351.08.
After the pan-European STOXX 600 index rose 0.67% and MSCI's gauge of stocks across the globe shed 0.71%.
"Today's probably the right reaction," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis. "Until inflation is under control, it's not under control. There's too much uncertainty."
Samana also pointed to the tone of the ECB's comments about threats to growth heading in the wrong direction will risks to inflation are "to the upside."