Wall St ends lower, Treasury yields slide as data fuels recession jitters

By Stephen Culp

NEW YORK (Reuters) – U.S. stocks lost ground on Wednesday and Treasury yields extended their decline as a batch of data fueled worries that restrictive central bank policies could push the global economy into recession.

The S&P 500 closed in negative territory, and megacap momentum stocks dragged the tech-heavy Nasdaq down more than 1%, while defensive stocks helped keep the Dow modestly green.

The 10-year Treasury yield slid further to a near seven-month low.

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 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.

“The Fed did what it wanted. The economy is slowing down. It’s working,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “There’s a lot of thought out there that they might have overdone it.”

“When the Fed raises interest rates, the effects are both cumulative and with a lag,” Tuz added. “The lag is over, we are seeing broad based softness.”

At last glance, financial markets are pricing in a 57% likelihood that the central bank will let its key interest rate stand at its still-restrictive 4.75%-5.00% range at the conclusion of its next policy meeting in May, according to CME’s FedWatch tool.

Traders bet on Fed rate cut by July meeting https://www.reuters.com/graphics/USA-RATES/FEDWATCH/egpbyjlzxvq/chart.png

The Dow Jones Industrial Average rose 80.34 points, or 0.24%, to 33,482.72; the S&P 500 lost 10.22 points, or 0.25%, at 4,090.38; and the Nasdaq Composite dropped 129.47 points, or 1.07%, to 11,996.86.

European shares edged lower as investors remained cautious, tilting toward defensive stocks amid economic uncertainty.

The pan-European STOXX 600 index lost 0.16% and MSCI’s gauge of stocks across the globe shed 0.45%.

Emerging market stocks lost 0.10%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.02% lower, 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 soft economic reports supported the notion of a “Fed pause.”

Benchmark 10-year notes last rose 8/32 in price to yield 3.3089%, from 3.337% late on Tuesday.

The 30-year bond last rose 16/32 in price to yield 3.5676%, from 3.594% late on Tuesday.

The greenback advanced against a basket of world currencies after disappointing private payrolls data prompted investors to lighten their short positions ahead of the Labor Department’s payrolls report on Friday.

The dollar index rose 0.32%, with the euro down 0.47% to $1.09.

The Japanese yen strengthened 0.25% versus the greenback at 131.39 per dollar, while sterling was last trading at $1.2455, down 0.35% on the day.

Crude prices were mixed as investors weighed signs of economic softness against a U.S. stock draw-down and plans by OPEC+ producers to cut oil output.

U.S. crude fell 0.12% to settle at $80.61 per barrel and Brent settled at $84.99 per barrel, up 0.06% on the day.

Gold prices were essentially flat after briefly touching their highest level since March 2022.

Spot gold % to $2,020.39 an ounce.

(Reporting by Stephen Culp; Additional reporting by Dhara Ranasinghe; Editing by Andrea Ricci, Diane Craft and Richard Chang)